Financial Intelligence Centre Bill [B1-2001][Fourth Draft] this draft as of 16 August.
The session covered Clauses 43 to 58 and the Schedules. The Committees, with the assistance of the drafters, Mr P Smit (Asset Forfeiture Unit) and Mr M Phillips (National Treasury), went through the working draft selecting those clause options which were felt to present the best possible formulation of the law. The preferred options of the National Treasury and the Justice Department are marked with a "*". Where clauses or options are not specifically discussed it can be assumed that the preferred options were adopted.
Much discussion ensued on Clause 51C, which specifically deals with the forfeiture of goods or cash to the state. The provisions on forfeiture as they relate to guilty parties were fully comprehended. Complexities arose around the issue of how innocent parties are to be treated as far as the penalties for non-compliance is concerned. Another point of concern was what qualifications and remedies would be available to innocent parties for the retrieval of goods forfeited to the state.
In the past committees were not always kept abreast of regulations that were passed or amended after the passing of a piece of legislation. It is for this reason that the committees came to the decision to include in the Bill a provision that requires any amendment of an exemption or regulation to be tabled in Parliament first, before its approval.
Chapter 5: Enforcement of this Act
Clause 43 – Administrative Enquiries
Ms Hogan enquired as to why this whole section had been deleted. She said she realised that Adv de Lange had raised a possible constitutionality problem during the initial discussion of the Bill. She asked whether the removal of the section was indeed the best course of action. Mr Phillips, a member of the drafting team said that the drafting team reconsidered the section after Adv de Lange raised his concern. Mr Phillips said that after looking at the clause more carefully, they too doubted its constitutionality. Mr Phillips said that there was two grounds on which the section came under doubt. Firstly, the clause would effectively make the Centre a judge in its own matters and secondly would create another court separate to the existing court system. Mr Phillips said that the latter position was taken to avoid the use of ordinary courts as far as possible. However, after close consideration, the drafting team realised that the use of the existing court system, despite its problems, would pose a real threat and serve as much of a deterrent function as this administrative action would.
Adv de Lange said that despite his suggestion in the initial discussions, the drafters should not be over hasty in getting rid of this clause. Adv de Lange reminded that in the initial talks he advised that a report be compiled and the constitutionality of the clause be further investigated. Adv de Lange said that before deleting these clauses this report should be looked at.
Clauses 50A to 50P
Mr Philips told Adv de Lange that these clauses contained the offences. The offences were now each contained in their own section as per Adv de Lange previously expressed preference.
Adv de Lange said that perhaps subclause 50A(1) should be modified to include an act of omission. Mr Phillips said that he saw no way in which an omission could give rise to an offence in the context of this clause.
Mr Philips said that he would prefer to break this clause into three separate sections, making subclause 50D(1)(b) stand separately as clause 50E and subclause 50D(1)(c) stand alone as clause 50F. The Committee did not object and it was decided that this change would be made.
The Committee noted that the clause should contain the word ‘willfully’.
Adv de Lange said that to this point only ‘failure’ crimes had been created. He asked if any offences had been created that rendered it illegal for persons to help others circumvent the legislation. Adv de Lange said that this was important because people were not going to fail to comply with the Act so much as they will help other to circumvent the Act. He said that this area of activity might generate more offences than ‘failure’ crimes would.
Mr M Lekgoro (ANC) said that a comparative analysis should be made. He said we should look to other jurisdictions to see how the treat these failure crimes and see for example, if standard practice elsewhere is to make things like failing to train staff a serious offence.
Mr Phillips said that in drafting the Bill the drafters did look to other jurisdictions. He said that the other jurisdictions created a number of offences with varying degrees of seriousness. Ms Hogan than added that these other jurisdictions should be looked at to establish other such problems. She said that in speaking to the British authorities, she learnt that one of their biggest problems was getting accountable institutions to comply with the legislation.
Clause 50J – Misuse of Information
Adv de Lange pointed out that in subclause (1)(b) of this clause intent is required while in the other two clauses the word willfully does not appear. Adv de Lange reminded that in a court subclauses (1)(a) and (b) would be interpreted not ot require intent but only negligence for guilt. This would be the position because there was no specific mention of the word ‘willfully’ in these other subclauses. Adv de Lange wanted to know if this was what the drafters intended. Mr Smit, from the asset forfeiture unit said that he could not recall and had no information before him to shed light on the situation.
Mr K Andrew (DP) said that he felt the clause was fine as it was. He said that negligence was all that should be need in this circumstance. He said this was so because the information being dealt with was highly confidential and constituted a serious infringement of individual rights. In such circumstances this information should be highly protected and dissemination of this information, even through negligence, should not be tolerated. Adv de Lange said that he too felt this way and believed that at least this should have been the intention of the drafters.
Clause 50M – Conducting Transactions to Avoid Reporting Duties
Adv de Lange wanted to know why the clause provided for where two or more transactions were conducted to avoid reporting duties. His concern was that it might be able to avoid the reporting duty through a single transaction. Mr Phillips said that this provision was in place to combat the situation where a transaction was broken up onto smaller parts as to not exceed the reporting threshold. This procedure is referred to as ‘smurfing’ and Ms Hogan pointed out that this was a considerable problem all over the world. Mr Phillips added that he saw no manner in which a single transaction could give rise to this offence.
Clause 50N - Unauthorised Access to Information or Application or Data
Adv de Lange said that he felt the clause to be too wide and vague. He said that under subclause (2) an individual would be guilty of an offence for just turning a computer on. Mr Phillips said that this was their intention to be harsh. He said that the information that the Centre would have control over was of such a sensitive nature that it had to be well protected. He said that if someone who did not belong in the Centre or did not have a right to the information held by the Centre, then for them to walk into the Centre and simply turn on a computer should indeed be an offence.
Clause 50O – Unauthorised Modification of Contents of Computer System
Mr K M Andrew asked the drafters if computer experts had been consulted in the formulation of this section and the previous one. Mr Smit said that these sections had been lifted out of another Act. He said that in the formulation of these sections for inclusion of that Act, individuals that had been employed in the computer industry and computer science students had been consulted.
Clause 50P – Definitions
Mr K Andrew asked why these definitions had found their way to this part of the Bill and were not instead located at the beginning of the Act where all the other definitions were. Mr Smit said that these definitions were located here because they applied only to the two proceeding clauses
Adv de Lange said that these definitions had not been dealt with appropriately. He said that the definitions had to be either linked to the applicable sections or subject to a proviso stating that they applied only to the two preceding clauses. He said that they could also be located at the beginning of the Bill with the other definitions also subject to the proviso. He said that at the very least they should be subject to this proviso where they stood. Adv de Lange said that ultimately it was a matter of drafting style.
Clause 51 – Penalties
Adv de Lange said that he would prefer the matter to be simplified. He said he would feel more comfortable with subclauses (1) and (2) being collapsed into one with subclause (3) being left separate. Adv de Lange said that this might be hard in light of the differing penalties provided for. He said however that he felt harsher penalties should be imposed. He said that once this is done the two can be combined because the penalties provided for in the Bill are only guidelines. Instead in every given set of circumstances the penalty will have to carefully considered by the judge.
The Offences are divided between subclauses (1) and (2) with subclause (1) imposing a heavier penalties for what was felt to be the more serious offences. Adv de Lange said he that he felt the offences should not be divided in this manner as in a given set of circumstances an offence in the supposedly less serious category could constitute as serious a crime as any.
Mr Smit agreed with Adv de Lange’s argument saying that the process of sentencing was a long and complicated process that was often longer than the actual trial proceedings. Mr Smit said that the sentencing procedure lent itself to a situation modeled on Adv de Lange’s suggestions. The clause was put down for a possible redraft.
Mr K Andrew, trying to gain an overall perspective, asked which other crimes these offences had been compared to in arriving at the suggested penalties. Mr Andrew asked what the maximum penalties for fraud and theft were.
Mr Smit replied that these crimes could not simply be compared to others such as theft and fraud. He said that these penalties were obtained through careful consideration and by looking at other jurisdictions.
NEW OPTIONAL CLAUSE: Clause 51A – Jurisdiction of the Courts
Mr Phillips said that the function of this clause was to give jurisdiction to a court to handle certain matters where ordinarily that court would not have had the jurisdiction to handle the matter.
Clause 51B – Defences
Mr Smit said that these Defences were available only to individuals and not to accountable institutions. He said that these defences were necessary as clause 29 now places the duty to report on all individuals within the accountable institution and not just the accountable institution.
Clause 51C – Search, Seizure and Forfeiture
Adv de Lange said that subclauses (3)(a), (b) and (c) confused him as he could not understand when after the 90 day period would the money seized be returned. Mr Smit said that subclauses (3)(a),(b) and (c) were the three ways in which an individual can be taken to court. He said that once money is seized the 90 day period starts to run. However, once criminal prosecution is initiated in one of these three ways, the 90 day period is suspended and ceases to run. However, if the 90 day period elapses then the individual from whom that money was confiscated is immediately entitled to have the money returned to them.
The committees continued with deliberations on the Bill.
proceeded to take the committees through the Bill, beginning at Chapter 5 and ending with
Clauses 51C: Search, seizure and forfeiture Clauses 51C(4) and 51C(5)
The clauses deal specifically with where a person has been convicted of an offence of taking money or property overseas without declaring it. In addition to the punishment that has been imposed by the court all cash and property seized shall be forfeited to the state.
Mr P Smit stated that he was pleased with the way the clauses were at present. He did however suggest that a possible option could be to consider the intention of the person when the infringement was committed.
Mr K Andrew (DP) reviewed the possibilities before the committees. The clauses at present provide that all cash or property is forfeited notwithstanding the intention of the perpetrator at the time of committing the crime. The suggestion by Mr Smit creates a second option for the committees that the intention to perpetrate a crime be a requirement to justify forfeiture to the state. In other words, the perpetrator must have had the intention not to declare the cash or goods.
Mr Andrew was concerned about the harshness of the punishment, particularly to innocent parties. He stated that this is especially so when one considers that an average South African family travelling in Africa would at least take R20 000 - R30 000 with them. Huge amounts of cash are needed, as the use of traveler’s cheques is not feasible in most African countries. Innocently forgetting to declare the money would mean that the entire amount would be forfeited to the state. Mr Andrew felt this to be totally unreasonable.
Adv J de Lange agreed. He stated that a qualification is necessary in order to justify the forfeiture. Adv de Lange referred the committees to Clause 50E and suggested the insertion of the word, "willfully" in the clause so as to give the required qualification to a forfeiture order. Clause 50E (Failure to report conveyance of cash into or out of Republic), now reads:
Any person who willfully fails to report the conveyance of cash into or out of the Republic in accordance with section 32, is guilty of an offence."
Adv de Lange asked how Clauses 51C(4) and 51C(5) relate to the Prevention of Organised Crime Act, Act No121 (POCA).
Mr Smit stated that the clauses could co-exist with POCA. In a criminal forfeiture, the requirement is that a conviction must first take place. In a civil forfeiture, there is no requirement that a conviction has to take place first. Mr Smit assured members that the provisions in POCA and the Bill would be able to co-exist. The committees agreed to the clauses.
Adv de Lange however asked the drafters to come up with a mechanism that would allow the return of goods seized where a person was found not guilty of an offence. The drafting team agreed.
Provision is made in the clause that a declaration of forfeiture shall not affect the interest of another person other than the convicted person if such person is able to show that such interest was obtained in good faith and for consideration.
Mr Andrew stated that if the requirement were that goods must have been obtained in return for consideration, how would donations and inheritances be treated.
Mr Smit suggested scrapping the requirement of obtaining the goods for consideration and limiting the requirement at good faith.
Adv de Lange felt uncomfortable about limiting the requirement at good faith and suggested extending the requirement by providing that the goods must have been obtained lawfully.
Mr Smit felt that extending the requirement to goods obtained lawfully would be overkill and would not be feasible.
Adv de Lange suggested that the committees come back to the clause later as he was wary of limiting the requirement at good faith. The committees agreed.
Clauses 51C(7) and 51C(8)
The committees agreed to the clauses
The clause makes provision for an innocent party to appeal separately or jointly with an appeal against the conviction of the guilty party in order to have a forfeiture order to be set aside.
Mr Andrew asked why the appeals of the guilty and that of the innocent would want to be combined.
Ms Hogan agreed with Mr Andrew and asked why it had not been seperated.
Mr Smit stated that it is merely a procedural clause and that the rules of the court would in any event prevail.
Adv de Lange asked why then the need for the clause if the rules of the courts are clear.
Mr Smit stated that it is there for the convenience of having separate appeals by either the guilty and the innocent when it is needed.
The committees agreed to the clause.
The committees agreed to the clause
Chapter 6: Miscellaneous
Clause 52: Act not to limit powers of investigating authorities
Mr Phillips presented the committees with two possible options.
He suggested opting for Option 2.
Adv de Lange felt them both to be lacking and suggested that they come back to them
Clause 52A: Amendments to list of accountable institutions
The clause makes provision for the Minister to amend the list of accountable institutions
in Schedule1 if the list had been approved by Parliament before its publication.
The committees agreed to the clause.
Clause 52B: Exemptions for accountable institutions
The clause provides for the Minister after consulting with the Council or the Centre to exempt certain accountable institutions from the provisions of the Act.
Adv de Lange suggested that a provision be included in the clause, which states that the list of exempted institutions should first be tabled in Parliament before its approval. The idea behind the suggestion is not for Parliament to give its approval for the exemptions but merely to keep them informed about it.
Ms Hogan agreed to the suggestion and so did the rest of the members.
Clause 52C: Amendments to list of supervisory bodies
The clause makes provision for the Minister to amend the list of supervisory bodies in Schedule 2.
Ms Hogan suggested that subclause 52C(i)(a) end at the words "regulatory functions", thereby deleting the rest of the wording in the subclause.
Subclause 52C(i)(a) would now read:
" Add to the list any entity or functionary which in terms of legislation performs regulatory functions [in relation to any category of accountable institutions].
Mr Phillips agreed to the suggestion.
The committees agreed to the amendment and to the rest of the clause.
Clause 52D:Minister may amend Schedule 3
The clause provides for the Minister to amend the list of reporting institutions in Schedule 3. The committees agreed to the clause.
Clause 53: Regulations
The clause provides for the Minister to make, amend, repeal and amend regulations in terms of this Act. The committees agreed for certain technical changes to be made to the clause. Adv de Lange suggested that a provision be included in the clause for regulations to be tabled in Parliament before being approved. The reasoning behind the suggestion is the same as that, that had been given with the insertion in Clause 52B. he committees agreed to the suggestion.
Clause 53A: Tabling of Regulations
Adv de Lange suggested the deletion of the clause, as the jest of its provisions would be
included in Clause 53 above. The committees agreed.
Clause 54: Indemnity
The clause essentially indemnifies any person who has acted in terms of this Act.
Mr Phillips placed three options before the committees. The committees unanimously chose Option 1.
Clause 55: Amendment of Prevention Act
The committees had already previously agreed to the clause.
Clause 56: AppIication of Section 7 of Prevention Act to accountable institutions
The committees had already previously agreed to delete the clause.
Clause 57: Status of footnotes
The footnotes in the Act are there for ease of reference to relevant provisions of the
Prevention Act. They do not form part of this Act. The committees agreed to the clause.
Clause 57A: Transitional arrangements
The clause states that all transitional arrangements would still be maintained until the time comes for them to end. Adv de Lange stated that the Act would have to be implemented in a phased approach and therefore could find no fault with the clause. The committees agreed with him.
Clause 58: Short title and commencement
The committees agreed to it.
Schedule 1: List of accountable institutions
Ms Hogan felt that it would best to leave the contents of the schedule up to the Money
Laundering Council to decide. The committees agreed.
Adv de Lange asked the drafters to research how other countries have decided on which
professions to include and which to exempt in the list.
Ms Hogan stated that they would discuss the issue at another time.
Schedule 2: List of supervisory bodies
The committees had already previously agreed to the list.
Schedule 2A: List of reporting institutions
The committee had already previously agreed to the list.
Mr Phillips however suggested making a change to number two on the list. He wanted to replace the words, "Kruger rands "with the word "bullion". The reasoning was that Kruger rands might not in the future be the only gold coin that South Africa mints. The sentence would then read:
"A person who carries on the business of dealing in [Kruger rands] bullion".
Ms Hogan stated that the suggestion would not be possible, as we are not allowed to trade in gold bullion. She suggested leaving the clause as is for the present. The committees agreed.
The meeting was adjourned.