Tag Archive | financial intelligence centre amendment bill

Parliament goes into Easter recess

….editorial….

Now you see it, now you don’t

……    It has now become almost impossible to avoid the use of the time-honoured expression “politics aside” when following legislative developments in Parliament.

The body politic affects most things all the time – from drafting a Bill to a
government media briefing, from debating a departmental investigation to public hearings on new legislation. It all involves the ideology of who is in charge.

In fact, the Oxford Dictionary describes “politics’ as follows: the activities associated with the governance of a country or area, especially the debate between parties having power.

From this one can see how politics will always continue to dominate government policy, legislation, and the parliamentary process, since in the end all permeates down from Cabinet decisions. That’s the way it works. Until of course the moment occurs that corruption, cronyism and state capture dictate the parliamentary process itself.

Then the fine line between policy and politics gets rather tacky. Shady motives such as personal gain or protection from the law become evident. What started out as well-meaning policy can get warped by politics and the passage of legislation becomes erratic, if not unconstitutional.

Coded language

Clearly there are now two Cabinets in South Africa. Also, there are various government departments that tend to follow one faction or another, all reporting to their respective portfolio committees. Of these, some seem to adhere to parliamentary rules on oversight and others seem to be less deep in their probing.

This explains why Jackson Mthembu, Chief ANC Party Whip who conveys ANC messages to the party loyal in Parliament, plays such a critical and pivotal role.

When it becomes ‘a given’ that those in control willfully use the top-down structure to their advantage and become joined at the hip with the party list system, then the decision to follow the orders of the party begin to involve a fear of being unable to pay the school fees or pay the lease on the recently acquired BMW.

It is the party list system that is our constitutional blind spot. It encourages cronyism, defined once again in the Oxford Dictionary as: the appointment of friends and associates to positions of authority, without proper regard to their qualifications.

No change

When this aberration of the democratic process occurs on a regular basis, the expression “politics aside” seems to come back into usage. This time for a different reason.

Understandably, one cannot go through the whole laborious process in every debate and with every turn of inexplicable behaviour explaining the manipulation of facts or non-disclosure of relevant information; the influence that certain business persons have upon policy decisions; or the behaviour of state department heads who seems oblivious of their duties.

Therefore politically-correct shortcuts become necessary in order that one’s own opinion is not involved. It’s a sort of coded language that straight up and down people use as a replacement for the real thing.

So, politics aside, President Zuma is still holding up the Financial Intelligence Centre Bill to combat money laundering. Politics aside, Minister of Mining, Mosebenzi Zwane, is still attempting to get fifty-six changes adopted under the already approved Mineral and Petroleum Resources Amendment Bill and, politics aside, the Expropriation Bill is back with Parliament once again.

The good news

Far more interesting is that, politics aside, the separation of powers is still working to a greater or lesser degree; the legislative process is still being respected by most and irritating some; and the Constitutional Court is still out there as our standard bearer, minus a number of computers.

 

…. and, politics aside, we could be doing so much better.

editorial.... parlyreportsa....27 march 2017

Posted in cabinet, earlier editorials0 Comments

FICA Bill could meet new task force deadline

OECD money task force waiting for SA  

….sent to clients Feb 7…. Chairperson of the Standing Committee on Finance, Yunus Carrim, made it quite clear in terms of parliamentary rules that further debate on the FICA Bill aligning SA to global money laundering task force requirements are confined to the President’s reservations about the Bill’s constitutionality on the issue of warrantless searches. Nothing else was to be debated or considered despite attempts, he said.

After a “suspicious delay”, to quote the Democratic Alliance, of over five months during which the President unexpectedly failed to sign the Bill into law, it was suddenly returned to Parliament with the query a few days before closure for the Christmas recess.

Playing for time

It is suspected that the President’s office might have been making a pitch for more debating time on the Bill in 2017 and to allow the Bill to be re-scrutinised thereby causing further delay or even allowing for an ANC motion to reject the Bill.  This is according to one Opposition member on the Committee.

Following this, in a meeting hastily convened before Parliament closed, parliamentary orders were changed and Chair Carrim re-scheduled the Committee’s last meeting which was to be held on the Insurance Bill.  He instead scheduled an urgent meeting to debate the President’s move, calling for both legal opinion from the State Law Advisor and the attendance of National Treasury to learn of implications caused by the delay.

Next move

As of the result of this last-minute meeting, Parliament and Carrim have to some extent countered what seemed the purposeful delaying tactic.    The Committee agreed to call for written submissions only, preferably containing legal opinion, on only the constitutionality of Clause 32, section 45B (1C) on warrantless searches, saying only such will be allowed and no generalised observations on any other clauses or the rationale behind the Bill will be heard.

In the meeting, MPs expressed anger at the waste of public money and even Chair Carrim expressed his frustration of having to go back to the drawing board on a Bill that had already been passed. “I am getting too old for these kind of games”, he said.

Carrim concluded, “This Bill was approved by Parliament in its entirety and by a majority vote after many months of debate. Legal opinion was called for on many aspects and its signature into law was urgently required to meet international deadlines. In terms of the Joint Parliamentary Rules therefore, only the one aspect that the President has queried could be considered and the Bill was to be returned with the opinion of this Committeeafter a vote in the NA.

Advice sought

It was agreed by the Committee that legal counsel specifically would be sought on the constitutional aspects raised and this would be returned together with the Bill as it stood for signature in an attempt to convince the President not to refer the matter to the Constitutional Court and further delay implementation of a law approved by Parliament.

Adv. Jenkins, State Law Advisor, told Yunus Carrim that he could see no grounds for the contention that the circumstances of warrantless searches were not properly circumscribed in the Bill and were thus legal. It was established that FICA had already conducted some 380 warrantless searches.

Adv. Jenkins pointed out that in terms of the Constitution and Parliamentary rules the President could only return a Bill once to Parliament, whatever the specific subject or subjects.  Thus, this was the only issue that should be debated and considered by Parliament.

It would also be preferable, he said, to return also legal opinion based on supporting input from public hearings, but he advised that once again this should be confined to the subject matter, i.e. warrantless searches.

Country exposed

Meanwhile, President Zuma’s obviously purposeful delays have exposed South Africa to further detrimental opinion from the Financial Action Task Force (FATF) who are holding a plenary meeting of the OECD in Paris in February, Treasury deputy director-general Ismail Momoniat told Chair Yunus Carrim.

South Africa could well be slapped with a warning letter or even a fine at taxpayer’s expense for failing to sign into law amendments to the Financial Intelligence Centre Act, he said, and added that this would not be helpful at the time of a Standard and Poor financial rating exercise to be carried out in the New Year.

Local banks at risk

Even a mild rebuke from the Task Force could have significant consequences for SA, DG Momoniat said, since it would raise concern among foreign regulators and banks about SA’s commitment to vigilant financial regulation.     This in turn would have a ripple effect throughout the economy since correspondent relationships between the global network of banks are vital to effect payment for South Africa exports and imports.

Carrim responded that of the two bad options resulting from the President’s actions, the least damaging was to ignore OEDC opinion for the moment, take proper legal counsel on the issue and await the opening of a new session in late January/early February 2017 for a water-tight case to go back to the President’s office. DG Momoniat acknowledged that Treasury noted the course that was being adopted.

Jeremy Gauntlett S.C. was to be contacted and the question of warrantless searches be considered by him, the wording revised if necessary according to counsel given and the Bill returned to the National Assembly for adoption based on any revisions, if made.

Rules for submissions

The final position was therefore that all submissions to Parliament had to only deal with the constitutionality of section 45B (1C) dealing with warrantless searches in clause 32 of the Bill and those making submissions were requested to provide legal opinions for their arguments .

It was suspected that Black Business Forum and other groupings would make a determined effort widen the scope of the deliberations.

Any submissions on other provisions of the Bill, not the subject of the hearings, had to be made separately in more public hearings to be held on “Progress on Transformation of the Financial Sector”, tentatively set for 14 March 2017. Those additional hearings will be advertised separately, said Carrim’s parliamentary notice when published.

Previous articles on category subject

FICA Bill : Hearings on legal point – ParlyReportSA

FIC Bill hold up goes to roots of corruption – ParlyReportSA

Red tape worries with FIC Bill – ParlyReportSA

Posted in Energy, Finance, economic, Justice, constitutional, LinkedIn, Security,police,defence, Special Recent Posts, Trade & Industry0 Comments

Red tape worries with FIC Bill

FIC Bill : lengthy hearings expected….

Sent to clients 1 December….. Parliament has expressed strong doubts that there will be enough time left in the current parliamentary year to pass the FIC or Financial Intelligence Centre Amendment Bill despite Treasury’s call that international pressure was being placed upon South Africa to update its governance ability to monitor international financial crime.

The Bill intends enhancing South Africa’s anti-money laundering (AML) to combat better the financingmoney crime of terrorism by amending the anchor Financial Intelligence Centre Act “so as to define or further define certain expressions” in the basic Act in order to structure an entity to monitor counter-intelligence of financial crime and to penalise those in dereliction of the new rules.

Hearings from public sector

In that alone, there are many differences of opinion on terminology. This will no doubt emerge during hearings on the Bill from the public sector and many queries will also surround the establishment of a Financial Intelligence Centre in its envisaged form.

Also, the powers provided the Bill, it is feared by a number of Opposition members, may add the layers of “red tape” to current SA financial investment procedures, “thus contributing further to the belief that South Africa is an unfriendly business destination.”     Hearings are expected to re-emphasise this whilst the need for AML tightening.

yunus carrimYunus Carrim, chairperson of the Standing Committee on Finance, known for his commitment to detail and the meticulous observation of constitutional requirements, expressed his dismay to Mr. I Momoniat, Treasury Deputy Director-General for Tax and Financial Policy, that such a long and highly controversial Bill being was being introduced by National Treasury at this point of the parliamentary calendar under the general description of “a few minor amendments called for in terms of constitutional court decisions.”

This was echoed by MPs across party lines, to which must be added the obvious delays that might be caused by the current strike by NEHAWU and parliamentary committee working staff.

Criminalising comes up again

In response, Mr. O Makhubela, Chief Director; Treasury Financial Investments and Savings, said that there were serious consequences associated with non-compliance with international norms, such as the risk of heavy fines from overseas regulators and lack of multinational business confidence.

Ismael Momoniat of Treasury joined the debate to add that the new Financial Intelligence Centre (FIC) “had to have teeth in order to forestall international enquiries” and situations that might arise such as the large fines imposed on MTN by Nigerian regulators “which tended to undermine potential investor confidence” in the same manner that BNP Paribas was harmed by the $9bn fine imposed on by the USA for violating USA sanctions against Sudan, Iran and Cuba.

MPs complained that small companies in South Africa were not as big as Paribas or necessarily the same size as MTN and they were going to find the intrusions envisaged by the FIC impossible to give full compliance to.

Treasury responded with the assurance that it would be left to the discretion of the FIC whether to impose a fine or simply issue a warning and the nature of the transaction and its size.

Main purposes

Treasury said in their briefing document that the four principal objects of the Bill, which were to alignmoney laundering the country with international standards on money laundering and to counter terrorist bodies; to enhance customer due diligence within financial institutions; to provide for the implementation of the UN security council resolutions relating to the freezing of assets of persons suspected of financial crimes and for the FIC to introduce a risk-based approach by financial entities to the current aspects international financial crime.

Treasury countered the argument that dis-investment would being encouraged by the Bill with the argument that failure to implement the Bill would result in lower levels of investment going forward as a result of a lack of compliance with international rules by South Africa.

Prominent persons

momoniatMuch debate took place over the definition of “prominent persons, both domestic and foreign” who were to be the subject of investigation and Ismail Momoniat was at pains to state “there was no implication or presumption that prominent persons being investigated were presumed to be involved in any financial crime.”

Probably the provisions most likely to affect entities operating in South Africa are the clauses affecting due diligence. Those that are accountable in terms of the Act will be required to undertake ongoing customer due diligence overviews in order to establish the identity of “the beneficial owner” and the customer’s identity.

These classifications are intended to aid accountable institutions to “properly identify their clients” but do not entail a presumption that these prominent persons are more likely to be involved in any criminal activity.

Furthermore the FIC requires the entity to establish “the purpose and intended nature of the business relationship, and to keep information relating to the business relationship up to date and to scrutinise transactions in order to establish if the transactions are consistent with the accountable institution’s knowledge of the customer and the customer’s business, and to identify anomalies in transactions patterns”.

Obscurification

One of the main objectives, Momoniat said, was for Treasury to establish that entities did not “hide true identities behind trusts” or confuse transactions by moving money through “a corporate veil representing a spider’s web.”

A “beneficial owner” is defined in the proposals to be in respect of a judicial person, the natural person who, independently or together with a connected person, owns or controls the juristic person directly or indirectly, including through bearer share holding.

Risk Management

The concept of responsibility for risk management and industry compliance has been included in the Bill, Ismael Momoniat said.  It places this responsibility “on all accountable institutions to develop, document, maintain and implement” anti-money laundering anti criminal financial transaction programmes and to “ensure that employees are trained to comply with the new Act for which the board of directors or the senior management of the accountable institution are (also) responsible”.

Hearings will commence once Parliament is able to provide the necessary platform, not available at the time due to striking parliamentary workers and staff.
Other articles in this category or as background
Parliament steps up its financial oversight role – ParlyReportSA
Financial Sector Bill after Ponzi thieves – ParlyReportSA
Draft Cybercrime Bill drafts industry – ParlyReportSA
South Africa on international cybersecurity – ParlyReportSA

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