Treasure keen to Talk about Tough Bill

Financial institutions have been given more breathing room before a strict new law comes into force after the Treasury agreed to pause and address some of the industry’s concerns.

The Treasury will be locked in discussions with financial institutions over the next month about amendments to the Financial Intelligence Centre Act, which critics, including the Banking Association SA, say imposes more burdensome obligations on accountable institutions than required internationally.

Accountable institutions, according to the act, include those that provide financial advice.

Treasury deputy director-general Ismail Momoniat said on Wednesday there was no need to rush the amendment bill through Parliament. The issues raised by stakeholders were of concern and needed to be addressed.

The Treasury’s chief director of financial investments and savings, Olano Makhubela, said it was keen to address the concerns.

Parliament’s standing committee on finance has just wrapped up public hearings on the bill. The bill will not be processed this year and could be on the statute books only towards the middle of next year.

Institutions have complained about the lack of adequate consultation on the bill.

A requirement that data stored by accountable institutions be held in SA is likely to be changed because it is out of sync with cloud technology and the reality of information-sharing within multinational groups.

The banking association, the Association for Savings and Investment SA, and individual banks have also urged that the bill give institutions that fall under the act flexibility and discretion in identifying and monitoring risky clients.

The intention of the changes is to introduce a risk-based approach. However, it fails to take into account prescriptions on due diligence and other matters that institutions have to comply with regardless of their circumstances.

Banking association representative Yvette Singh said the changes to the act were more onerous than the recommendations of the Financial Action Task Force regarding standards for combating money laundering and the financing of terrorism.

She said the bill required banks to treat high-risk clients in the same manner as low-risk ones. In addition, the bill obliged banks to verify the identity of beneficial owners of entities, and the bill’s use of the term "prominent influential persons" instead of the internationally recognised "politically exposed persons", would create confusion.

Ms Singh also warned that the higher compliance burden would be costly and make South African banks uncompetitive relative to their international counterparts in funding infrastructure projects on the continent.

Senior policy adviser at the Association for Savings and Investment, Anna Rosenberg, said there had not been enough consultation on the bill. The association’s members were concerned that no provision had been made for transitional arrangements.

At least 18 months are required for institutions to change their systems and train staff to prepare for the new regime.

 by Linda Ensor,