MONEY LAUNDERING CONTROLS IN SOUTH AFRICA

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MONEY LAUNDERING CONTROLS IN SOUTH AFRICA
BY THIBEDI MAJAKE CEO NATIONAL GAMBLING BOARD
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MAIN PURPOSE OF THE ACT IS TO ESTABLISH A
FINANCIAL INTELLIGENCE CENTRE AND ADVISORY
COUNCIL TO COMBAT MONEY LAUNDERING ACTIVITIES IN
SOUTH AFRICA
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WHAT WERE CASINOS DOING PRIOR TO THE FIC ACT?
CASINO TRANSACTION REPORTING OBLIGATIONS IN
TERMS OF GAMBLING LEGISLATION

• TRANSACTIONS WHICH EXCEEDS R25 000 00 IN VALUE TO
  BE RECORDED AND REPORTED
• WHEREBY AN EXCHANGE OF CASH FOR CASH OR OTHER
  NEGOTIABLE INSTRUMENT IS DONE FOR OR ON BEHALF OF
  A CLIENT
• WHEREBY A CHEQUE OR OTHER NEGOTIABLE INSTRUMENT
  IS ISSUED TO OR A TRANSFER OF FUNDS IS DONE FOR A
  CLIENT IN EXCHANGE FOR CASH OR OTHER NEGOTIABLE
  INSTRUMENT
• REDEMPTION OF GAMBLING CHIPS FROM A PATRON FOR
  CASH OR OTHER NEGOTIABLE INSTRUMENT

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• GAMBLING TRANSACTIONS EXCEEDING R25 000 00 cont.
• ISSUING GAMBLING CHIPS TO A PATRON IN EXCHANGE
  FOR CASH OR OTHER NEGOTIABLE INSTRUMENT.
• RECEIVE CASH OR OTHER NEGOTIABLE INSTRUMENT AS A
  DEPOSIT FOR GAMBLING OR FOR SAFEKEEPING.
• RECEIVE CASH OR OTHER NEGOTIABLE INSTRUMENT IN
  SETTLEMENT OF CREDIT EXTENDED.
• ACCEPT AS A WAGER CASH OR OTHER NEGOTIABLE
  INSTRUMENT AT ANY GAMBLING ACTIVITY WHERE
  GAMBLING CHIPS ARE NOT CUSTOMARILY USED FOR
  GAMBLING.
• RECEIVE OR ISSUE FROM OR TO CLIENT, CASH OR
  OTHER NEGOTIABLE INSTRUMENT FOR ANY OTHER
  TRANSACTION.

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CASINO OBLIGATIONS UNDER THE FIC ACT

• TO IDENTIFY CLIENTS AND OTHER PERSONS Section
  21 read with Regulations 2 to 6, 17 to 19, 21, 25
  and 27
• TO KEEP RECORD OF BUSINESS RELATIONSHIPS AND
  TRANSACTIONS Section 22 read with Regulations
  20 and 26
• TO REPORT CASH TRANSACTIONS ABOVE PRESCRIBED
  LIMIT Section 28
• TO REPORT SUSPICIOUS AND UNUSUAL TRANSACTIONS
  Section 29 read with Regulations 22 to 24

Continue
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• TO REPORT ELECTRONIC TRANSFER OF MONEY IN EXCESS
  OF A PRESCRIBED LIMIT TO OR FROM THE REPUBLIC
  Section 31
• TO FORMULATE AND IMPLEMENT INTERNAL RULES
  Section 42, and
• TO PROVIDE TRAINING AND APPOINT A PERSON
  RESPONSIBLE FOR COMPLIANCE WITH THE PROVISIONS OF
  THE ACT Section 43.

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PRACTICALITY IS ESSENTIAL TO ENSURE COMPLIANCE
- EXEMPTIONS PROVIDES

• FICA PROVIDES FOR CERTAIN EXEMPTIONS FROM
  COMPLIANCE FOR CASINOS
• EXEMPTIONS HAVE BEEN PROMULGATED ON 20 DECEMBER
  2002
• REGULATIONS AND EXEMPTIONS TO COME INTO OPERATION
  ON 30 JUNE 2003

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EXEMPTION IN RESPECT OF GAMBLING INSTITUTIONS

• GENERAL EXEMPTION FROM THE FIC ACT
• THE FIC ACT AND REGULATIONS LIMITED TO GAMBLING
  ACTIVITIES, I.E GAMBLING WAGERING RELATED
  TRANSACTIONS

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GENERAL EXEMPTION FROM DUTY TO IDENTIFY AND KEEP
RECORDS OF CLIENTS (SECTIONS 21 26 OF FICA AND
REGULATION 2 20)

• GENERAL EXEMPTION FROM DUTY TO IDENTIFY AND KEEP
  RECORDS OF CLIENTS (SECTIONS 21 26 OF FICA AND
  REGULATION 2 20)
• ALL SINGLE TRANSACTIONS IN RESPECT OF
• CREDIT, REPRESENTATION OF VALUE AND CASH
  TRANSACTIONS BETWEEN CLIENT AND CASINO (BUY- IN
  AND PAY-OUTS)
• NOT EXCEEDING R25,000
• ANY
• DEPOSITS
• REPAYMENT OF CREDIT
• SINGLE WAGER IN CASH ON A GAMING MACHINE AND
• MONEY RECEIVED FOR SAFEKEEPING
• NOT EXCEEDING R25,000

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• ANY CASH EXCHANGE FOR CHIPS TO PLACE A SINGLE
  WAGER -
• NOT EXCEEDING R5,000 AT A TABLE GAME
• CASES WHERE CASH, CHEQUES, OTHER NEGOTIABLE
  INSTRUMENTS OR FUNDS ARE EXCHANGED FOR CASH,
  CHEQUES, OTHER NEGOTIABLE INSTRUMENTS OF FUNDS TO
  BE TRANSFERRED
• NOT EXCEEDING R25,000

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• SPECIFIC EXEMPTION IN RESPECT OF DUTY TO IDENTIY
  ANY RECORD KEEPING
• THE FOLLOWING INFORMATION IN RESPECT OF
  IDENTIFYING CLIENTS ARE NOT REQUIRED
• SA CITIZENS / RESIDENTS
• INCOME TAX NUMBER (AND VERIFICATION)
• RESIDENTIAL ADDRESS (AND VERIFICATION)
• FOREIGN NATIONALS
• SA TAX NUMBER (IF APPLICABLE)
• RESIDENTIAL ADDRESS
• ONLY THE FOLLOWING INFORMATION IN RESPECT OF
  RECORD KEEPING TO BE KEPT
• AMOUNT INVOLVED
• IDENTITY OF PARTIES TO THE TRANSACTION
• ALL ACCOUNTS INVOLVED IN TRANSACTIONS CONCERNED

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TRAINING AND MONITORING COMPLIANCE

• SECTION 43 OF THE FIC ACT
• PROVIDES FOR THE TRAINING OF EMPLOYEES
• ENABLE THEIR COMPLIANCE AND UNDERSTANDING AND
  THEREBY THE ACCOUNTABLE INSTITUTIONS COMPLIANCE
  WITH THE FIC ACT
• APPOINT A PERSON TO ENSURE COMPLIANCE BY THE
  EMPLOYEES AND THE ACCOUNTABLE INSTITUTION

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• TRAINING MANUAL IS DIVIDED INTO FOUR MODULES
• MODULE 1 CREATES AN UNDERSTANDING OF WHAT MONEY
  LAUNDERING IS
• MODULE 2 CREATES AN UNDERSTANDING OF WHAT MONEY
  LAUNDERING IS. PROVIDES FOR CLIENT
  IDENTIFICATION AND CLIENT PROFILES
• MODULE 3 PROVIDES EXPLANATIONS OF REPORTABLE
  TRANSACTIONS, WHAT THESE ARE AND POSSIBLE KEY
  INDICATORS
• MODULE 4 PROVIDES FOR THE REPORTING
  REQUIREMENTS OF REPORTABLE TRANSACTIONS

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• TRAINING OF VARIOUS STAFF LEVELS
• BASIC TRAINING FOR ALL STAFF
• SUSPICIOUS TRANSACTION AND IDENTIFICATION
  TRAINING FOR FRONT LINE / INTERFACE STAFF
• HIGHER LEVEL MONEY LAUNDERING AND REPORTING
  TRAINING FOR SUPERVISORS AND MANAGEMENT
• IN-DEPTH TRAINING ON MONEY LAUNDERING, INCLUDING
  LEGISLATION, REGULATIONS AND CONTROL FOR ALL
  MONEY LAUNDERING COMPLIANCE OFFICERS

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• TRAINING TO DEAL WITH SUSPICIOUS AND UNUSUAL
  TRANSACTIONS
• MOST DIFFICULT OF THE PROVISIONS AND SUBJECTIVITY
  SHOULD BE GUARDED AGAINST
• BEHAVIOUR IS SUSPICIOUS, NOT PERSONS
• DETERING POSSIBLE ATTEMPTS AT MONEY LAUNDERING
• (I.E. NOTICES AT CASH DESKS REGARDING OBLIGATIONS
  TO REPORT CERTAIN TRANSACTIONS)

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• PROCEDURES FOR SUSPICIOUS AND UNUSUAL
  TRANSACTIONS
• VALUE OF TRANSACTION AT BUY-IN OR AT REDEMPTION
  WILL TRIGGER IDENTIFICATION REQUIREMENT
• REFUSAL TO PROVIDE IDENTIFICATION MAY ESTABLISH
  SUSPICION
• TEST AGAINST OTHER KEY SIGNS SUCH AS
• IDENTIFICATION DOCUMENT SEEMS TO BE FALSE
• CLIENT INQUIRES ABOUT THE REASON FOR THE
  IDENTIFICATION REQUIREMENT AND HOW IT CAN BE
  AVOIDED

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• OFFICERS TO ENSURE COMPLIANCE
• APPOINTED COMPLIANCE MANAGERS OR SURVEILLANCE
  MANAGERS HAVE OVERALL RESPONSIBILITY
• ESCALATING LEVELS OF REPORTING
• HAVE CCTV AT THEIR DISPOSAL
• UTILIZATION OF TARGET REPORTING
• PUNTER SCANS
• INTELLIGENCE FILES ON KNOWN CRIMINALS
• INFORMATION SHARING WITH OTHER CASINOS

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POSSIBLE QUESTIONS ABOUT THE CURRENT SITUATION IN
CASINOS

• Q DO THE CASINOS HAVE CLEAR POLICIES, PROCEDURES
  AND CONTROLS TO DETER MONEY LAUNDERING?
• A PRIOR TO THE PROMULGATION OF THE FINANCIAL
  INTELLIGENCE CENTER ACT, THE CASINO INDUSTRY
  ALREADY HAD ESTABLISHED REGULATION AND BEFORE
  THAT THE REGULATORY ENVIRONMENT, INTERNAL
  CONTROLS THAT DETERRED POSSIBLE ATTEMPTS AT MONEY
  LAUNDERING, ALTHOUGH NOT SPCIFICALLY DESIGNED FOR
  THAT PURPOSE

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• Q DO THE CASINOS HAVE WRITTEN PROCEDURES FOR
  IDENTIFICATION AND VERIFICATION PURPOSES?
• A THE CASINO INDUSTRY HAVE COMPILED AND REVISED
  THEIR INTERNAL RULES AND PROCEDURES TO COMPLY
  WITH THE REQUIREMENTS OF THE FIC ACT, IN TERMS OF
  CLIENT IDENTIFICATION AND VERIFICATION. THIS HAS
  BEEN IN PLACE SINE MAY 2003

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• Q IN JUNE 2003 IT BECAME A STATUTORY REQUIREMENT
  TO RETAIN CERTAIN RECORDS OF CUSTOMER
  TRANSACTIONS. WHAT IS THE CURRENT STATUS OF
  RECORD KEEPING OF THE CASINOS IN THIS REGARD?
• A CURRENTLY CASINOS ARE REQUIRED TO MAINTAIN
  RECORDS OF TRANSACTIONS IN EXCESS OF R25,000 IN
  TERMS OF EXISTING GMBLING LEGISLATION. IN
  ENSURING COMPLIANCE WITH THE FIC ACT, MINOR
  ADAPTATIONS TO THE CURRENT PROCESS AND MANNER OF
  RECORD KEPING HAVE BEEN MADE AND IS IN PLACE

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• Q HAVE THE CASINOS TAKEN APPROPRIATE MEASURES TO
  MAKE EMPLOYEES AWARE OF THEIR RESPONSIBILITIES
  WITH REGARD TO FICA?
• A THE CASINO ASSOCIATION OF SOUTH AFRICA HAD
  COMMISSIONED A COMPANY THAT PROVIDED TRAINING TO
  THE BANKING SECTOR TO DRAW UP A TRAINING
  PROGRAMME FOR CASINOS. THE TRAINING PROGRAMME
  WAS DISTRIBUTED TO ALL CASINOS COVERED BY THE
  ASSOCIATION AND TRAINING OF ALL FRONT-LINE STAFF
  HAVE BEEN COMPLETED

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• Q DO THE CASINOS PROCEDURES ENSURE THAT THERE IS
  A GENERAL AWARENESS AMONG RELEVANT STAFF OF THE
  TYPES OF TRANSACTIONS THAT MAY INDICATE MONEY
  LAUNDERING?
• A THIS ISSUE HAS BEEN SPECIFICALLY ADDRESSED IN
  THE TRAINING ON MONEY LAUNDERING AND IN ADDITION
  TO THE EXISTING CASINO GAMBLING REGULATIONS AND
  CASINO INDUSTRY PROCEDURES THAT REQUIRED THAT
  CASINOS TRAIN ALL FRONT LINE STAFF TO DETECT
  TRANSACTIONS AIMED AT POSSIBLE MONET LAUNDERING,
  PROVIDES FOR A SOLID FUNDATION

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CONCLUSION

• CASINO LICENCES IN SOUTH AFRICA ARE LIMITED IN
  TERMS OF THE NUMBER THAT MAY BE ISSUED
• EACH APPLICANT FOR A LICENCE IS SUBJECTED TO
  EXTENSIVE SCRUTINY AND PROBITY TO ENSURE THE
  INTEGRITY OF THE APPLICANT COMPANY AND ITS
  MANAGEMENT
• THE CAPITAL AND RESOURCE INVESTMENT REQUIRED FROM
  A SUCCESSFUL APPLICANT IS SIGNIFICANT, THEREFORE
  NON-COMPLIANCE WITH THE LAW AND REGULATION MAY
  PUT THE LICENCE AT RISK OR JEOPRADISE THE
  CONTINUATION OF THE LICENCE AND COMPLIANCE IS
  THEREFORE OF UTMOST IMPORTANCE TO ALL
  SHAREHOLDERS
• SOUTH AFRICAN CASINOS HAVE THEREFORE COMMITTED
  THEMSELVES TO ENSURE COMPLIANCE WITH THE FIC ACT
  AS BEST REASONABLY POSSIBLE AND HAVE ESTABLISHED
  PROCESSES TO REVIEW THIS COMPLIANCE ON A REGULAR
  BASIS