Page 94 - Profile's Unit Trusts and Collective Investments 2021 issue 2

CHAPTER 5

Money Laundering
FICA defines money laundering (or money laundering activity) as an activity which has or is likely to
have the effect of concealing or disguising the nature, source, location, disposition or movement of
the proceeds of unlawful activities or any interest which anyone has in such proceeds, and includes
any activity which constitutes an offence in terms of FICA or the Prevention of Organised Crime Act of 1998.
Money laundering usually involves three phases. The first is called placement, when a criminal places dirty
money (eg, cash from drug dealing) into the formal financial system. The second is layering or concealment,
the process by which the criminal attempts to hide the link between the money in the financial system and the
original unlawful activities, usually by entering into a series of complex transactions which move money in and
out of various systems. The third is integration or re-entry, when money is reintegrated into the formal financial
system so that it appears to be clean and legitimate. Once the funds are “clean” they can be used for legitimate
transactions: property investments, purchase of luxury goods, or business investments.
Money laundering is also often associated with tax evasion.

Appoint a compliance officer (unless there is only one “key individual” and no
representatives are employed)
Maintain records for at least five years. These records must include:
Information about all premature cancellations of financial products (this applies to
products with a defined term, like endowments)
Details of all complaints received from clients, with information about how the
complaint was resolved
Details of any cases of non-compliance with the FAIS requirements, and reasons for
non-compliance
Maintain full and proper accounting records, which should be updated continuously and
reconciled and checked on at least a monthly basis
Prepare detailed annual financial statements according to generally accepted accounting
practice
Representatives (FSPRs) have specific duties and obligations in terms of FAIS, and the Act also
places certain obligations on FSPs in relation to the FSPRs which they employ. In terms of FAIS:
A representative must be able to provide confirmation to clients (ie, a certified
documentation from the FSP) which shows that the representative has a service contract
with the FSP.
It must be clear that the FSP accepts responsibility for the representative’s activities within
the scope of the service contract.
In turn, the FSP must be satisfied that all representatives in its employ (and this includes
“key individuals” of the FSPR if the latter is also a firm) are competent to provide the services
offered by the FSP. While representatives must comply with Fit And Proper Requirements,
therefore, the FSP must also take some responsibility, in terms of the Act, for ensuring that
FSPRs comply with the FAIS code of conduct and the internal rules of the FSP. FSPs must
maintain registers of representatives and key individuals, which must be regularly updated and
must be available to the Registrar.
Compliance Officers
Any FSP with more than one key individual or more than one representative must appoint a
compliance officer. The compliance officer can be an existing member of staff, but must be approved
by the Registrar. The job of the compliance officer is, broadly, to monitor compliance with FAIS. This
includes monitoring both the FSP itself and representatives in the employ of the FSP.
As part of fulfilling his or her functions, the compliance officer must submit regular reports and
must liase with the Registrar of financial services.
More specifically, the compliance officer is required to:
Function independently and objectively

92 Profile’s Unit Trusts & Collective Investments — Understanding Unit Trusts