An overview by Tilman Friedrich and Sabine Halberstadt
Background
The Organization for African Unity (OAU) was established on 25 May 1963 in Addis Ababa (Ethiopia). In terms of the Organization’s Charter each sovereign state in Africa shall be entitled to become a member of the Organization.
Namibia was admitted to the OAU in June 1990, 3 months after independence. On 9 July 2002 the OAU was disbanded by its last Chairperson, President Thabo Mbeki of South Africa and the organization was replaced by the by the African Union.
In 1999 Namibia signed the OAU’s Convention on the prevention and combating of terrorism. This convention inter alia deals with money laundering to finance terrorist activities. A member state signing such a convention is not ipso facto bound by the convention. The states who sign such conventions undertake to ensure that their respective states will ratify these conventions by incorporating the provisions of such conventions into their national legislation.
With the commencement of the new Financial Intelligence Act, Act no 13 of 2012 and the Preventions and Combating of Terrorist Activities Act, Act no 12 of 2012 on 21 December 2012, Namibia can ratify the convention.
Main Differences between the 2007 FIA Act ant the 2012 FIA Act
Besides the new FIA Act being considerably more detailed and specific than its predecessor law, as we will set out below, one of the main differences between the two Acts is the establishment of the Financial Intelligence Centre (Centre) that takes over the responsibilities previously shouldered by the Bank of Namibia, and the establishment of the Anti-Money Laundering and Combating Financing of Terrorism Council (Council). The Bank of Namibia (BON) now has to provide administrative services to the Centre (See section 7 (2)). The Centre is headed by the Director who may appoint its own staff complement and is now accountable to the Minister and no longer to the Governor of the Bank of Namibia. The Council comprises of the Governor, various PS’s (Finance, Nampol, Trade, Justice, Safety and Security), the Director of the Namibian Central Intelligence Agency, the President of the Bankers Association, a person representing accountable or ‘reporting institution’s and a person representing Namfisa (‘supervisory bodies’). It is to advise the Minister (of Finance) on policies and measures to combat money laundering and financing of terrorism activities and on the exercise of his powers.
New Definitions
Numerous new definitions were added. Probably one of the most significant new definitions is the definition of ‘risk clients’ which is defined as follows: ‘risk clients’ means any person, natural or legal whose activities pose a risk of money laundering or financing of terrorism activities. (For a list of the new definitions added in this act, refer to the list at the end of this article).
The definition of ‘authorized officer’ has been amended to now also include a member of the Anti-Corruption Commission, a person authorized by the Head of a Supervisory Body and a member of an investigation authority, in terms of any law that authorizes persons to investigate unlawful activities. It should be kept in mind that in terms of the new FIA Act, the only remaining Supervisory Body is NAMFISA.
Another new key definition is that of ‘unlawful activity’, which in terms of the Prevention of Organised Crimes Act, means “Conduct which constitutes an offence which contravenes any law within or outside Namibia, before or after commencement of the Prevention of Organised Crimes Act.”
The new definition of ‘reporting institution’ refers to institutions previously referred to as ‘accountable institution’ (motor dealers; second hand goods dealers; traders in jewelry, antiques or art; entities and persons regulated by Namfisa, now only short-term insurers).
‘Accountable institutions’ are, (a) legal practitioners, estate agents, Accountants or Auditors, who are involved in buying/selling of real estate; managing moneys; facilitating or sourcing contributions for, or establishing, operating or managing legal persons; buying or selling business entities or legal rights. (b) It encompasses: Trust and Company Service Providers who act as formation agent for legal persons; acting or arranging other persons to act as director or secretary or partner to a partnership or legal person; providing a registered office, business address, secretarial services or resources; acting as a trustee of a trust or as a nominee shareholder. (c) It encompasses the following institutions/types of business: banks; casinos; money lenders against or without security, such as but not only Agribank, DBN, NHE; a person/business trading in minerals or petroleum; a person/business trading in money market instruments, foreign exchange, currency exchange, exchange- interest rate and index instruments, transferable securities, commodity futures; any other securities services; a person who renders investment advice; Nampost; a person who deals with traveller’s cheques; a licensed stock exchange; a person who carries on business of electronic money or value transfer; certain persons regulated by Namfisa (individual/collective portfolio management, Long-term insurer, micro lender, friendly society, unit trust manager); auctioneer.
‘Regulatory Bodies’ encompass the Bank of Namibia, Law Society, Estate Agents Board, Public Accountants and Auditors Board and the Registrar of Companies that were previously referred to as ‘supervisory bodies’, whereas the new Act leaves under the schedule of ‘supervisory bodies’ only Namfisa. The obligations of the Registrar of Companies, who was a ‘Regulatory Body’ under the previous Act, are now dealt with in a separate section, as elaborated in Application of Act to Institutions.
In terms of the 2012 FIA Act NAMFISA is the only ‘Supervisory Body’ (Schedule 2) while in terms of the 2007 FIA Act the Registrar of Companies, Law Society of Namibia, Estate Agent Board, Public Accountants etc. were also classified as ‘supervisory bodies’. In terms of the 2012 FIA Act these bodies are now classified as ‘regulatory bodies’ (Schedule 4).
Application of Act to Institutions
Whereas the 2007 FIA Act applied to ‘accountable institution’s and ‘supervisory bodies’, the new Act imposes numerous new duties on the Registrar of Companies, the Master of the High Court and ‘reporting institution’s such as motor vehicle dealerships, persons doing business in second hand goods and short-term insurers. The Registrar of Companies for example must forward all changes in members, directors, shareholders or beneficiaries of companies owning immovable property, to the Registrar of Deeds. The Master of the High Court must keep up-to-date information in respect of the founder, each trustee, each income beneficiary and beneficial owners of all testamentary as well as inter-vivos trusts. There is furthermore a duty on a ‘reporting-’ or ‘accountable institution’ which has a business relationship with any Trust to inform the Master if a trust is not registered with the Master of the High Court.
Obligation to identify prospective clients
‘Accountable-‘ and ‘reporting institutions’ may not establish a business relationship or conclude a transaction/multiple transactions in excess of a specified amount unless the prospective client has been identified. For this purpose these institutions are required to establish the identity of a prospective client, and of the person on whose authority he is acting, where applicable, as well as the authority under which the client is acting and the same applies where a client is acting on behalf of a prospective client. Where the prospective client is a legal entity its legal existence, structure, its name, legal form, address, directors/partners or senior management, its principal owners and beneficial owner and provisions regulating the power to bind the entity must be established. Accounts must always be established in the name of the account holder and not in an anonymous or fictitious name. The same must be done for clients that existed when FIA Act of 2012 came into force within a specified period. Where these institutions are unable to establish the identity as required for existing clients within a reasonable period, it may not conclude further transactions and must immediately file a suspicious activity report. When such identity is subsequently established further transactions may only be concluded after the Centre has been informed of the identity.
Risk management and monitoring to be applied
Strangely, only ‘accountable institutions’ must have risk management and monitoring systems in place to identify clients or beneficial owners whose activities may pose the risks contemplated in this Act. Where such has been identified the source of wealth or funds must first be established and approval of top management be obtained before a business relationship may be entered into. Only ‘accountable institutions’ must also exercise ongoing due diligence in respect of all their business relationships, e.g. proper up-to-date records, monitoring consistency of transactions, activities and risk profile, specifically complex or unusually large transactions, those with an unusual pattern or no apparent economic purpose, examine background and purpose of transactions, keep all findings readily available and carry out enhanced monitoring and due diligence when doubts or suspicion arises. These institutions are obliged to undertake regular money laundering and financing of terrorism activities risk assessments taking into account the scope and nature of its clients, products and services, as well as the geographical area from where its clients and business dealing originate.
Customer acceptance policies to be employed
‘Accountable-’ and ‘reporting institutions’ must develop, adopt at senior management level, and implement a customer acceptance policy, rules, programs, procedures and controls to manage and mitigate the risks contemplated in this Act. There is also a new section setting out these institutions’ responsibilities when entering into cross-border banking relationships.
Record keeping obligations
Record keeping of ‘accountable-’ and ‘reporting institutions’ has been expanded by requiring maintenance of transaction amount and the parties to it, client/transaction files and correspondence, due diligence findings, copies of reports filed with the Centre, name of person who obtained the KYC documentation, documentation regarding identification upon establishment of business relationship after promulgation of this Act and also before promulgation of this Act. Records of all the information referred to in Obligation to identify prospective client also need to be maintained. These records may now be kept by a 3rd party service provider, provided the institution has unrestricted access.
The Centre has access during ordinary working hours, to any record kept in terms of this Act relating to suspicious money laundering or financing of terrorism activities and is entitled to reasonable assistance from those concerned.
Electronic fund transfers
When electronically transmitting or receiving moneys in excess of a prescribed amount, an ‘accountable-’ or ‘reporting institution’ must report the transaction to the Centre and must ascertain that prescribed originator information is provided or received with the transfer documentation and if such information cannot be obtained a suspicious transaction report must be filed with the Centre.
Obligation to report suspicious transaction
An ‘accountable-’ or ‘reporting institution’ or a person who carries on any business or is a director, secretary to the board, employed or contracted by any such business or institution is required to report to the Centre any suspicious activity that is contemplated by this Act (money laundering or financing of terrorism activities).
Centre is the supervisory body of all institutions not supervised by Namfisa
The Act places a number of additional obligations on ‘supervisory bodies’ (currently only Namfisa) and deems the Centre to be the supervisory body of all ‘accountable-’ and ‘reporting institutions’ that are not supervised by Namfisa (currently). For this purpose ‘accountable-’ and ‘reporting institutions’ not supervised must register their prescribed particulars with the Centre.
Conveyance of cash or similar asset across the border
Any person bringing or taking cash or bearer negotiable instruments in excess of a prescribed amount in any manner into or out of Namibia must correctly declare this in a prescribed manner to Customs and Excise or the Post Office, else it may be seized. For this purpose Customs and Excise and the Post Office are given specific powers.
Enforcement measures
No duty of secrecy or confidentiality whether imposed by legislation or arising from common law or agreement affects compliance with a provision of the Act.
No action whether criminal or civil lies against any person, body or institution that reports in good faith in compliance with the Act. Persons and the information such persons may have provided may not be disclosed.
Tipping off a person in respect of any matter contemplated by this Act that may prejudice an investigation or proposed investigation is an offence liable to a fine not exceeding N$ 10 million or 30 years imprisonment or both. The same penalty applied to the disclosure of confidential information held by or obtained from the Centre.
Any person who obstructs, hinders or threatens another person in the performance of their duties in terms of this Act is committing an offence and is liable to a fine not exceeding N$ 10 million or 30 years imprisonment or both.
A new section is introduced dealing with the appointment of inspectors and one that deals with inspections. An inspector may at any time on notice, enter and inspect any premises of any ‘accountable-’‘ or ‘reporting institution’ or person, direct persons to appear for questioning, produce documents or information in respect of a document, open a strong room, safe or container or use any computer system or equipment on the premises.
The Centre is empowered to issue directives and to impose or suspend (for not more than 5 years) administrative sanctions where a person has failed to comply with a directive or conditions set for a license, registration, approval or authorization. Such sanctions are a reprimand, a directive to take action, restriction or suspension of certain business activities, suspension of a license, or a penalty up to N$ 10 million which may directed at a person who was responsible for the failure of the ‘accountable-’ or ‘reporting institution’. The Centre may refer a matter with its recommendation to the Prosecutor General. The Centre or Namfisa (currently) may also institute proceedings in the High Court.
A new section is introduced on enforceable undertakings. Written undertakings by an ‘accountable-’ or ‘reporting institution’ to take specified action, refrain from specified action, becomes enforceable by application of the Director to the High Court, which may make any order in this regard.
The penalties for offences in terms of the Act increased astronomically. For example, contraventions of Section 22 of the new Act (Identification when transaction is concluded in the course of business relationship) the penalty is now a fine not exceeding N$ 100 million or imprisonment not exceeding 30 years, or to both such fine and imprisonment whereas the penalty in terms of the 2007 FIA Act was a fine not exceeding N$ 500,000 or 30 years imprisonment or both (Section 14 (6)).
In terms of the 2012 FIA Act, other measures must first be exhausted before penalties can be imposed (Section 51). These other measures are: the issuing of directives after consultation with the relevant supervisory body (Section 54), written undertakings by accountable or reportable institutions to comply with the Act (Section 55), administrative sanctions (Section 56) and applications to Court (Section 60).
The new Act also introduces an appeal board and appeal procedure similar to the appeal procedures in the NAMFISA Act (Sections 57 and 58).
FIA Act 2007 repealed, but not regulation, notices etc.
The Act repeals the FIA Act of 2007 but all regulations, exemption, notice, circular, determination or guidance issue under that Act are deemed to have been made or issued under this Act.
What are the implications of the new FIA Act on Pension Funds?
In terms of the Amendment of Schedule 1 to the Financial Intelligence Act dated 15 December 2011 registered pension funds and provident funds as defined in the Pension Funds Act as well as registered medical aid funds were expressly excluded from the definition of ‘accountable institutions’. The exclusion was repealed together with the 2007 FIA Act.
The 2012 FIA Act does not list pension funds or medical aid funds as being ‘accountable institutions’ which achieves the same result of exempting such institutions from the rather onerous record keeping and KYC obligations. Pension funds as any other person still have the duty to report suspicious transactions for example in cases where a member pays unusual additional voluntary contributions into the Fund, or redeems his housing loan in an unusual fashion.
List of new definitions
Bearer negotiable documents, beneficial owner, cash, Centre, competent authority, correspondent banking, Council, customer due diligence, Customs and Excise, electronic transfer, establish identity, financing of terrorism, inspector (differs from authorized officer in 2007 Act), payment instrument, person, records, Registrar of Companies and Close Corporations, regulation, ‘reporting institution’s, risk clients, risk management system, senior management, transaction.
References:
International Law, a South African Perspective, John Dugard,Juta & Co, LTD 1994
Documents on International Law, Handbook for Law Students and Constitutional Lawyers, Mtshaulana, Dugard, Botha, Jutta & Co Ltd, 1996
Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. Retirement Fund Solutions Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of Retirement Fund Solutions.