Terrorist financing and FICA: KPMG's Tersia Rossouw explains the latest amendments
As far as terrorist financing goes, research indicates that there are at least four primary types:
- illegal activity, such as drug trafficking, smuggling and extortion
- legal activity;
- state sponsorship, as in the case of Iran and Syria;
- and popular support, such as donations.
A fifth type has come about with the recent increase in Foreign Terrorist Fighters (FTFs). According to the Financial Action Task Force (FATF), FTFs are one of the main forms of material support to terrorist groups. KPMG's Tersia Rossouw, Partner, Forensics, offers insight into this subject and how the South African legislature, including amendments to the Financial Intelligence Centre Act (FICA), has responded to combatting this.
The fact is that these funds need to flow, be that through money remitters, cash smuggling or the formal financial system. The speed and ease with which funds can be moved are two of the reasons why the formal financial system remains a highly reliable and efficient manner for terrorists and terrorist organisations to move funds, both locally and across borders.
The South African legislature has responded to this immense challenge through, among others, the enactment of the Financial Intelligence Center Act (FICA) of 2001 (as amended), as well as the Protection of Constitutional Democracy Against Terrorist and Related Activities (POCDATARA) of 2004.
The latest amendments to FICA are contained in the Amendment Bill of 2015. Two notable amendments relate to (a) the implementation of financial sanctions in accordance with United Nations Security Council (UNSC) resolutions adopted under Chapter VII of the UN Charter, and (b) the administration by the FIC of measures requiring accountable institutions to freeze property and transactions in accordance with such financial sanctions.
In this regard, the existing terrorist property reporting obligation (section 28A) is extended to also cover the property and transactions of a person or entity identified in accordance with a resolution of the UNSC in a notice referred to in section 26A(1) of the Amendment Bill, being a notice by the Minister of Finance in a Government Gazette announcing the adoption of a UNSC resolution as referred to above.
In addition, the Amendment Bill prohibits the acquisition, collection or use of the property of a person or entity whose name is reflected on a sanctions list. This prohibition includes the provision of financial services/products to such a person and/or entity. Access to such services/products will only be considered when necessary to provide for basic expenses, such as food, rent, maintenance and medical expenses.
The above amendments can only be welcomed, since they aptly reflect the view of the Financial Action Task Force that "terrorism is an increasingly global problem that requires concerted global action by a united international community".