Why Employers Can’t Afford to Ignore FICA
FICA stands for the Financial Intelligence Centre Act and is a law in South Africa aimed at combating money laundering, tax evasion, and other financial crimes. The act places certain obligations and requirements on accountable institutions, including employers, to identify and verify their customers’ and employees’ identities, to mitigate the risk of financial crimes.
Must an employer FICA their employees?
FICA has recently issued a new set of guidelines, called Directive 8 and Public Compliance Communication, that explain how companies called “Accountable Institutions” should screen their employees. These guidelines require Accountable Institutions (AI) to regularly and carefully check both current and potential employees for their skills and honesty, in a way that takes into account the level of risk involved.
Why is the screening of employees necessary?
To prevent criminals from using or manipulating AI for their own purposes, it’s important to regularly check employees for any potential risks related to money laundering, and proliferation financing. This ongoing screening process helps to manage these risks and keeps the company safe from criminal activity.
What is a risk-based approach for employees?
The AI needs to assess how much of a risk an employee might pose and then carry out screening procedures that are appropriate for that level of risk. The higher the risk associated with the employee’s position, the more rigorous the screening needs to be and the more frequently it needs to happen. Once the screening is complete, the Accountable Institution will use the results to make a decision that considers the level of risk, in order to manage and reduce the risk of money laundering, terrorist financing, and other financial crimes. These screening procedures should be incorporated into the AI’s Risk Management and Compliance Programme (RMCP).
Another important aspect of screening is to check for an employee’s competence, which means making sure they have the right skills, knowledge, and expertise to do their job well. This involves reviewing their employment history, references, qualifications, and accreditations. Additionally, screening for integrity involves assessing an employee’s honesty and moral principles, such as by conducting criminal record checks.
Before hiring any new employees, AI’s are required to check the candidate against the Targeted Financial Sanctions list (TFS 1276 list) to make sure they’re not on the list. They also need to re-check their current employees every time the TFS list is updated. It’s recommended that AI start by screening high-risk employee positions first and then move on to lower-risk positions. If the Accountable Institution fails to comply with these guidelines, they may face administrative sanctions.
For further information, contact our offices. Alternatively, the Financial Intelligence Centre can be contacted directly on 021 641 6000 or www.fic.gov.za.