FICA was designed to combat money laundering activities, tax evasion and the financing of terrorist and related activities. However, the process by which private individuals, businesses and financial institutions are obliged to identify customers has become extremely cumbersome, expensive and time consuming. 

At present, section 21 of FICA establishes a duty on the part of an accountable institution to establish and verify the identity of a customer as soon as you wish to establish a business relationship or conclude a single transaction with a customer. The duties are to identify customers; keep records of business relationships and single transactions; report certain transactions; appoint a compliance officer and provide training to employees on their money laundering control obligations.

Natural persons are obliged to provide a lot of personal information such as full names, date of birth, identity number, current residential address and income tax registration number. In the case of a company you are often obliged to provide the registered name, registration number, registered address, trade name, physical business address, income tax and value added registration numbers. In the case of a close corporation one has to provide full names, date of birth and identity number of the natural person regarding each member. If you are dealing with a trust you must provide a trust name, trust number, beneficiary name, list of authorised trustees, address of the Master of the High Court where the trust is registered, income tax registration number of the trust and full names, date of birth and identity numbers of the trustees, beneficiaries, authorised signatories, founder and persons who act on behalf of the trust. You also have to provide the residential address of every trustee, founder and beneficiary. All of this information must be verified by documentation.

The obligation is commonly referred to as KYC - “know your customer”, which enables one to verify the identity of your customer. The question arises why it is necessary to keep doing this repeatedly every time with a number of institutions? Surely there should be an opportunity to comply with FICA’s requirements once, and once only, for example, when you move or after a certain period of time.

The legal profession could offer a solution in this regard. We could FICA individuals, companies, close corporations and trusts and this information may be verified through the use of notaries and in cooperation with the Financial Intelligence Centre. Notaries often authenticate documents and confirm/certify that a person appeared before them. They ask their clients to produce original identification documents and keep the documents signed and the supporting documents in their notarial protocols.

In South Africa, the banks have insisted that all their existing cu
stomers have to go through a FICA process whereas in the US and UK only high risk customers have to be verified.
A number of commentators have questioned whether the FICA process is constitutional as personal and private information is now readily available to tens of thousands of officials with no checks in place to protect the consumer. FICA has made consumers extremely vulnerable to identity theft. The Supreme Court of Columbia, in the case of Federation of Law Societies v Canada 2011 BCSC 1270, held that the FICA regime, insofar as it applies to lawyers and law firms, is unconstitutional. This case is probably distinguishable because it turns on the distinction between privilege and confidentiality. Nevertheless we are all increasingly subject to cyber fraud and steps need to be taken to protect our privacy and the integrity of our personal information. If a bank becomes compromised to the extent that their own employees are using their customer’s private information for criminal objectives, then we need to all be concerned.

There is no doubt that we need to reinforce the need for a risk based approach to vetting customers and financial transactions. However, the current process has become a constant headache for South African citizens. Part of our responsibility must be to reduce the amount of red tape in society and to make it easier to do business. 

References:
The Supreme Court of Columbia, in the case of Federation of Law Societies v Canada 2011 BCSC 1270
The Financial Intelligence Centre Act 38 of 2001 (“FICA”).