Documents handed out:
Financial Intelligence Bill [B1-2001]
Memorandum consisting of submissions on the Financial Intelligence Bill
Second memorandum (Book-B), consisting of further submissions made on the Financial Intelligence Bill (awaited; email firstname.lastname@example.org for documents)
The proceedings concerned the consideration of Clauses four through thirteen as well as the consideration of the submissions related to these clauses. Clause 29 was also discussed. However, the proceedings became very technical with the discussion of Clause 29 being postponed till greater clarity on this matter could be achieved. The discussion concerned whether Section 7 of the Proceeds of Organised Crime Act might be a more favourably constructed section that would better perform Clause 29's function.
What emerged from the discussion of Clause 29, was that the Bill sought to place the obligation to report suspicious transactions to the FIC on "accountable institutions" rather than on the individual employee within these institutions. The discussion of the other clauses was straightforward with no particularly contentious issue coming to the fore.
Functions - Clause 4
The proceedings began with the consideration of submission that suggested that the Financial Intelligence Centre (FIC) should publish an annual report. Mr Phillips, a member of the drafting team, said that an annual report is required of all such institutions and thus there was no need for legislation to provide for this.
Mr P Smit (Asset Forfeiture Unit) said that it was not the function of the FIC to create public awareness and to educate as to the function of the FIC and the relevant legislation, as was suggested by one of the submissions. The question was raised as to who was responsible for this if not the FIC.
Next a submission that the Bill should include a reference to the Prevention of Organised Crime Act. This moved the discussion to the consideration of Clause 29.
Suspicious Transactions - Clause 29
Clause 29 is found in Part Three of the Bill and relates to suspicious transactions. Right at the beginning of this discussion Ms Hogan identified the fact that clause 29 was very problematic and that it would best be left till its time came. However the Committee members persisted with Mr Phillips being asked what the difference between subclauses (1) and (2) were. He replied that subclause (1) provided for the situation where a transaction was concluded while subclause (2) provided for the situation where a transaction was enquired about but then never concluded.
Mr K Andrew ( DP) asked why the obligations to report were so different between this Bill and the Proceeds of Organised Crime Act. Why was the duty placed on the individual by the POCA Act, while this Bill placed the obligation on the "accountable institution".
Mr Phillips noted that this was a very contentious issue and the subject of much discussion. He said that it was an effort to keep the obligation in the Bill as simple as possible. He pointed out that the clause provided for strict liability. This was done to encourage these accountable institutions to implement preventative measures mentioned in the Bill.
A submission had been made by Prof De Koker (RAU) that Section 7 of the POCA Act replace Clause 29 as it provided a better construction and created an obligation of better substance. It was explained by Mr Phillips that Section 7 of the POCA Act is very inclusive and includes all undertakings and makes reference to property and not transactions. Through Section 7's construction a much wider obligation to report suspicious activities is created, placing this obligation in the hands of the general public as well as smaller undertakings.
Mr Phillips pointed out that the obligation created in the Bill placed the obligation to report suspicious transactions on organisations which qualified as accountable institutions because these were institutions which by the nature and size of their business would most likely encounter such transactions. Mr Phillips added that these accountable institutions, which would inevitably be financial institutions, were the only ones that had the kind of "know your client" relationship that made it possible to investigate reported suspicious transactions. If one of these institutions reported such a transaction, then they would be the only ones to possess a paper trail making it possible to investigate such a report. Mr Phillips also argued that placing this obligation on smaller institutions would result in a huge number of reports being made in relation to different transactions as well as the same transactions, making it impractical.
Mr P Smit added that in so far as Clause 29 provided for the reporting of suspicious transactions, he would like to see this clause resemble Section 7 of the POCA Act more closely, in that he would prefer the clause to require the reporting of suspicious transactions relating to any "property" and not suspicious " financial transactions", which created a much narrower situation.
Mr Phillips told the Committees that the form and content of Clause 29 was aimed at putting pressure on these accountable institutions to monitor their employees very closely. At this point, Clause 29 was committed for later discussion.
Clause 4 Continued
It was suggested that Clause 4(1) (a) be changed to include the word "retain". Mr Phillips said that this word would indeed be necessary in the clause because any information can only be of value if it may be retained so that proper and thorough consideration thereof could occur. Mr Philips said that the word retain would mean retain in perpetuity so that a database may be compiled. It was also however suggested, in relation to the time element of retention, that the period of retention be determined and set by the Minister.
Mr Andrew said that the term money-laundering in Clause 4 (1)(d) was very broad and in need of clarification. Mr Phillips conceded, saying that the sub clause was indeed undergoing change in light of the discussion of the definition of "money-laundering" as they had seen in previous meetings.
Adv de Lange asked what the effect of Clause 4 (1) (e) was. Mr Phillips said that the function of this clause was to encourage institutions who qualified as accountable institutions to appoint compliance officers. These compliance officers would be appointed in institutions which were large enough to merit the presence of such an officer. Here Mr Phillips again alluded to the fact that other institutions, such as second-hand car dealerships and small law firms, could also launder money, but the size of these institutions made it impractical to burden them with the same obligations enforced on accountable institutions.
General Powers - Clause 5
Mr Phillips said that the general function of this clause was to confer upon the FIC all the powers associated with juristic personality.
Mr Philips said that subclause (1)(a) might be useful but it could be excluded with the matter being left up to the Director's discretion.
Mr Philips explained that subclause (1)(h) enabled the FIC to collaborate with, and share information with similar institutions. This aspect was particularly important in an international context as the criminal activities involved with money-laundering, more often than not, spanned more than one continent.
Adv de Lange asked whether it was important to refer to this matter here when this issue was specifically dealt with in Clause 40. Mr Phillips agreed that perhaps this situation would best be changed.
Appointment of Director - Clause 6
The first issue was raised by Mr Andrew who said that subclause (2)(b) should provide for "specific measurable performance standards". His point was that often these performance standards are indeed required, but when one examines these provisions, it is discovered that they do not provide for anything much.
Ms Hogan (ANC) said that subclause (3) needed the words " fit and proper" added to it.
Mr de Lange pointed out that the appointment of a Director in this subclause would be made through consultation with the Council. However, the establishment of the Council could not be made before the establishment of the actual FIC. The problem arises that a Director is required for the initial creation of the whole institution. Thus the existence of the Director would have to precede the Council partly responsible for his own appointment.
Acting Director - Clause 7
Adv de Lange was confused as to why there was no Deputy created by the Bill and instead when a deputy was needed the Bill necessitated the involvement of the Minister.
Mr Phillips pointed out that this was an enabling clause and not an obligatory one and was intended to provide only in situations where the Director had not delegated his power in terms of Clause 13.
In response Adv de Lange said that in light of Clause 13, perhaps Clause 7 should be a 'notwithstanding' clause. He said it would be necessary because as the situation rested , it could not be established which clause would take precedence.
Responsibilities of Director - Clause 8
In relation to subclause (1)(b) Adv de Lange asked if this provision created similar circumstances as was the case with the prosecuting authority. In light of the nature of the institution and the work it carries out, such a construction would be favorable. Mr Phillips confirmed that this was the case.
Adv de Lange pointed out that he would be happier if subclause (4) expressly stated, that the policy directions spoken of, were to be determined through collaboration between the Director and the Minister.
Staff - Clause 9
The only question asked here was whether employees of the state seconded in terms of this clause would qualify as employees of the FIC. To this Mr Phillips simply pointed out that people seconded in this manner never qualify as employees of the organ to which they are seconded.
Pension Rights - Clause 10
Mr Phillips contended that this clause placed employees in the same position as other public servants in relation to pension.
Adv de Lange pointed out that this clause was not reconcilable with Clause 5 (1)(a) which provided that employees would be taken on subject to the terms and conditions agreed upon between them and the Director. Adv de Lange pointed out that the construction of Clause 10 needed to be changed to allow for more elastic terms of employment. Individuals would need to be employed for relatively short periods of time and the legislation should not entrap them in their employment.
Funds - Clause 11
Adv de Lange was very eager to hear an explanation of subclause (1) ( c ) which was felt by Ms Hogan to include assets seized by the Asset Forfeiture Unit.
Mr de Lange pointed out that the Minister of Finance did not allow such provisions in relation to any other organisation, including the Scorpions. The question was raised why such a clause, which could perhaps allow the FIC to retain proceeds obtained through forfeiture.
Mr Phillips replied that he was not quite sure what the section meant, and would examine it more closely and offer a more accurate explanation at a later stage. What Mr Phillips did say is that he felt it to be a 'just in case' provision, that would allow the FIC to retain proceeds from the sale of its own assets, such as furniture or computers.
At this point the proceedings were brought to a close.
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