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Directive 8 and the Public Compliance Communication recently gazetted by the Financial Intelligence Centre provide Accountable Institutions (AI’s) with practical guidance on the application of screening their employees. The directive places an onus on AI to screen both their current and prospective employees for competence and integrity periodically and in a risk-based manner.
Why is the screening of employees necessary?
To mitigate the risk of the AI being abused (or influenced) by criminals. Periodic screening allows for ongoing management of money laundering (ML), terrorist financing (TF) and proliferation financing (PF) risks.
What is a risk-based approach for employees?
The AI must determine the level of risk an employee poses and ensure that the screening applied is proportionate to the level of risk. More stringent screening will be required for a higher risk, which is determined by the employee’s role. Based on the outcome of the screening, the AI makes a risk-based decision to ensure ML/TF/PF risks are mitigated and managed.
The screening for competence refers to determining whether the employee has the necessary skills, knowledge and expertise to perform their functions effectively (eg. to review their employment history, references, qualifications and accreditations). On the other hand, screening for integrity refers to the honesty and moral principles of an employee (eg. Criminal record checks).
Employee’s roles which are considered high risk will require enhanced and more frequent screening as well as competency and integrity screening on an annual basis. This should be incorporated into the AI’s Risk Management and Compliance Programme (RMCP).
AI’s must further scrutinise all prospective employees against the targeted financial sanctions list (TFS list – list 1276) before appointing them. All current employees must be checked when updates are made to the TFS list.
AI’s are encouraged to commence with the screening of their high-risk employee roles as soon as possible and to then focus on the lower-risk employee roles. Failure to comply with this directive may result in the imposition of an administrative sanction.
For further information, contact our offices. Alternatively, the Financial Intelligence Centre can be contacted directly on 021 641 6000 or www.fic.gov.za.
