1145 FIC Annual Report 2008.indd - Financial Intelligence ...

2008annual report

fi nancial intelligence centrefic

PUBLISHED BY FINANCIAL INTELLIGENCE CENTRE

Private Bag X115

Pretoria 0001

South Africa

Tel: +27 12 309 9200

Fax: +27 12 309 9491

Design and layout: Formeset Digital Pretoria

Printing and binding: Formeset Printers Cape (Pty)Ltd

ISBN: 978-0-621-37992-7

RP: 167/2008

fi nancial intelligence centrefic

Annual Report2007 – 2008

31 July 2008

Mr T A Manuel, MP

Minister of Finance

Report of the Director of the Financial Intelligence Centre for the

period 1 April 2007 to 31 March 2008

I have the honour to submit the Annual Report of the Financial

Intelligence Centre which gives an account of the Centre’s activities

and achievements for the period 1 April 2007 to 31 March 2008.

M Michell

Director

CONTENTS

Administrative Information 1

Accounting Authority’s Statement 2

Acronyms used 6

Director’s Report 7

Performance Report 41

Audit Committee Report 51

Report of the Auditor-General 53

Statement of Financial Position 60

Statement of Financial Performance 61

Statement of Changes in Net Assets 62

Cash Flow Statement 63

Accounting Policies 64

Notes to the Annual Financial Statements 72

Materiality and Significant Framework 85

1

ADMINISTRATIVE INFORMATION

Administrative Information

DIRECTOR

Mr M Michell

CHIEF FINANCIAL OFFICER

Ms A Puoane

POSTAL ADDRESS

Private Bag X115

Pretoria 0001

South Africa

PHYSICAL ADDRESS

240 Vermeulen Street

Pretoria 0002

South Africa

TELEPHONE

+27 12 309 9200

FAX

+27 12 309 9491

WEBSITE

www.fic.gov.za

BANKERS

Standard Bank

2

ACCOUNTING AUTHORITY’S STATEMENT

The Financial Intelligence Centre has been operating for five years. The process to build the Centre

started slowly, with the two years immediately after its establishment having consisted primarily

of developing a framework and procedures for its operations. Since then the pace has quickened

sharply.

The Centre has now received a total of 90,067 suspicious transaction reports, and the process of

referrals to the law enforcement authorities has become more efficient with an increasing number of

referrals made each year. There are also very positive signs of the extent to which the referrals are

being used in investigations to track the proceeds of crime.

The analysis of suspicious transaction reports and making referrals to the law enforcement authorities

for investigation remains only part of the Centre’s work. The Compliance and Prevention Department,

working closely with the various supervisory bodies, closely monitors compliance with the Financial

Intelligence Centre Act (FIC Act). During this past year it undertook a series of 212 joint audit reviews

of businesses and 27 independent audits of post office branches.

The Legal and Policy Department has the responsibility for the administration for the FIC Act,

consistently monitoring policy developments at home and abroad, interpreting the legislation and

liaising with a host of partners in this regard.

The activities of these departments are underpinned and supported by the Corporate Services

department, without which the Centre could not receive its results. Great strides have been made

in capacity-building, the development of the IT system, and oversight of the Centre. Management

is proud of the fact that the Centre has received an unqualified audit report from the Office of the

Auditor-General again this year.

Yet, these nevertheless remain early steps in the journey to create a sustainable and consolidated anti-

money laundering and combating of financing of terrorism (AML/ CFT) system within South Africa.

The Centre itself has the challenging mission which is –

“To establish and maintain an effective policy and compliance framework and operational capacity

to oversee compliance and to provide high quality, timeous financial intelligence for use in the fight

against crime, money laundering and terror financing in order for South Africa to protect the integrity

and stability of its financial system, develop economically and be a responsible global citizen.”

This mission still requires many years of effort to be accomplished.

The FIC Act, as one piece of legislation which interlinks with the Prevention of Organised Crime Act

(POC Act) and the Protection of Constitutional Democracy Against Terrorist and Related Acts Act

Accounting Authority’s Statement

3

(POCDATARA Act), aims to protect South Africa’s financial system, its institutions, the state and our

citizens from being abused by criminals and terrorists and their networks, while seeking to create

tools for law enforcement to more effectively prevent money laundering and financing of terrorism

activities.

The Centre has made great progress in fulfilling its mandate during the past year. This has only been

possible because of the relationships with the many different stakeholders which have grown and

deepened in the past year.

The Centre is happy to report that there has been a noticeable increase in the extent and quality of

the interaction with a growing range of diverse accountable and reporting institutions and businesses.

This has had a positive effect on the compliance environment, while accepting that this area shall

need long-term development before institutions will be fully compliant. There has been a significant

improvement of the relationship with the various supervisory bodies, which are now better able

and equipped to implement their responsibilities with respect to the FIC Act. The Centre and the

law enforcement authorities have continued to work well during the year which has resulted in

further consolidation of the respective relationships and has led to greater efficiency in the sharing of

information for investigative purposes.

Among the achievements for the past financial year and set out in detail in this report, the Centre:

Completed 85 joint inspections for FIC Act non-compliance together with the relevant

supervisory bodies for casinos and bookmakers, estate agents, authorised dealers in foreign

exchange, insurance companies, financial service providers, collective investment scheme

managers, members of the JSE and branches of the Post Office bank; Issued Guidance Note 4 providing clarification for accountable institutions on suspicious

transactions reporting; Continued to hold feedback sessions with accountable institutions, supervisory bodies and

law enforcement authorities; Received 24,580 suspicious transaction reports during the 2007/08 financial year and made

999 referrals to the law enforcement authorities for investigation worth in excess of R2 billion

as part of its responsibility to capture, analyse and refer reports; Secured the first convictions for non-compliance of the Financial Intelligence Centre Act in the

matter of the State vs Maddock; Initiated research to identify trends and reporting and to eventually enable the Centre to issue

regular typologies reports; Issued the draft FIC Act Amendment Bill and completed preparations for Parliament to consider

the Bill; Completed the detailed design and specification identification for the development of the

Centre’s new IT system in preparation for the process to build the new IT system;


4Accounting Authority’s Statement

Completed the first step of the move away from the National Treasury buildings to the Centre’s

new premises; Continued to develop close working relationships with the various supervisory bodies enabling

the transference of knowledge to the different industry sectors and the skills determine

compliance in terms of the FIC Act; Strengthened working relations with the various law enforcement authorities and liaised

closely in order to ensure greater use of the Centre’s information for investigations; Finalised preparations to deploy an official from the Centre to work in the Secretariat of the

Eastern and Southern Africa Anti-Money Laundering Group; Prepared for the mutual evaluation of South Africa by the FATF and ESAAMLG; by interacting

with various counterparts across government and facilitating workshops; Completed preparations to re-locate the IT and Analysis sections of the Centre to new

premises; Continued to recruit staff to the positions created within the establishment as well as

introduced various talent management processes to ensure that the Centre is able to maximise

its potential to retain skilled and enthusiastic staff; and Received an unqualified audit from the Office of the Auditor-General for the 2007/2008

financial year.

The Centre’s staff complement has grown during the year and will continue to do so until it reaches

the threshold of the first stage in its development. All of the Centre’s staff have demonstrated their

focus on the objectives and have done everything and more to achieve the targets set for it. I want

to recognise their contribution and the many hours of overtime worked and extra effort made and to

indicate my deep appreciation for their efforts and commitment.

I want to express my deep appreciation for the support and assistance provided to the Centre and

to me over the past five years by the Director-General, Lesetja Kganyago, and all officials from the

National Treasury. They have always gone out of their way to assist me and the Centre, thereby

ensuring that we have been able to carry out our work and that the Centre achieves its targets year

after year. In particular I wish to thank the members of the National Treasury’s Technical Assistance

Unit for their special efforts of assistance.

The members of the Centre’s Audit Committee under the stewardship of its Chairperson, Mr Clive

Kneale, have provided the Centre and management with oversight and guidance during the past year,

keeping us focused and on track. This has made a very big difference to our efforts and is warmly

appreciated by all the Centre’s management and staff.

I want also to thank the Deputy Minister of Finance, Mr Jabu Moleketi, MP for his support of the

Centre and its work previously and during the past year.

I wish to reserve a particular word of gratitude to the Minister of Finance, Mr Trevor Manuel, MP,

for the consistency of his guidance and encouragement since the inception of the Centre. He has

5

been a tough taskmaster who has always set the high of standards for me and everyone working in

the Centre. He has concerned himself with our work, raised concerns when necessary, and always

ensured we remain focused on our objectives.

Murray Michell

Director

8 August 2008


6Acronyms Used

ACRONYMS USED

ADLA Authorised Dealer in Foreign Exchange with Limited Authority

AFU Asset Forfeiture Unit

AML/ CFT Anti-Money Laundering/ Combating of Financing of Terrorism

BSD Banking Supervision Department of the South African Reserve Bank

CENTRE Financial Intelligence Centre, as established under the FIC Act

CIPRO Companies and Intellectual Property Registration Office

DSO Directorate of Special Operations

EAAB Estate Agency Affairs Board

Egmont Group Organisation of financial intelligence units from 108 different countries

ESAAMLG Eastern and Southern Africa Anti-Money Laundering Group 1

FATF Financial Action Task Force 2

FIC Act Financial Intelligence Centre Act, Act No. 38 of 2001

FIC Financial Intelligence Centre, as established under the FIC Act

FIU Financial Intelligence Unit

FSB Financial Services Board

FSRB FATF-Style Regional Body

IRBA Independent Regulatory Board of Auditors

MOU Memorandum of Understanding

NGB National Gambling Board

PLA Provincial Licensing Authorities

POCA Prevention Of Organised Crime Act, Act No. 121 of 1998

POCDATARA Protection Of Constitutional Democracy Against Terrorist and Related Activities

Act, Act No. 33 of 2004

SAPS South African Police Service

SARS South African Revenue Service

SCCU Special Commercial Crimes Unit

STR Suspicious Transaction Report

1 ESAAMLG comprises of the following 14 Member States, namely: the Republics of Botswana; Kenya; Malawi; Mozambique; Mauritius; Namibia; South Africa; Seychelles; Tanzania; Uganda; Zambia and Zimbabwe; and the Kingdom’s of Lesotho and Swaziland.

2 The FATF comprises the following members: Argentina; Australia; Austria; Belgium; Brazil; Canada; China; Denmark; European Commission; Finland; France; Germany; Greece; Gulf Co-operation Council; Hong Kong, China; Iceland; Ireland; Italy; Japan; Kingdom of the Netherlands*; Luxembourg; Mexico; New Zealand; Norway; Portugal; Russian Federation; Singapore; South Africa;

Director’s Report

annual report

2008fic

7

Director’s Report8

DIRECTOR’S REPORT

BACKGROUNDIntroduction

The systems to combat money laundering and terror financing in South Africa remain relatively

young. The implementation of legislation against money laundering gained momentum with the

commencement in 2002 of the Financial Intelligence Centre Act, of 2001 and the development of the

Financial Intelligence Centre as an institution. The framework for the combating of terror financing is

even more recent with legislation in this regard commencing in May 2005.

South Africa has developed a comprehensive legal structure to combat money laundering and financing

of terrorism. The main statutes are the Prevention of Organised Crime Act, 1998 and the Financial

Intelligence Centre Act, 2001. The current provisions dealing with the manipulation of the proceeds

from unlawful activities are contained in the Prevention of Organised Crime Act. This Act contains

three offences which combine to criminalise a wide range of money laundering activities. These are

the offences of money laundering, assisting another to benefit from the proceeds of crime and of

acquisition, possession or use of such proceeds. These provisions came into force in January 1999.

The Financial Intelligence Centre Act, 2001 (the FIC Act) 3 has as its principle objective establishment

of the Financial Intelligence Centre for it to assist in the identification of the proceeds of unlawful

activities and the combating of money laundering activities and more recently, the financing of terrorist

and related activities. The FIC Act also introduces a regulatory framework of measures concerning

client identification, record-keeping, reporting of information and internal compliance structures which

apply to a broad range of financial and non-financial institutions as well as defines the anti-money

laundering responsibilities of supervisory bodies.

Terror financing is criminalised broadly in the Protection of Constitutional Democracy against Terrorist

And Related Activities Act of 2004. This Act criminalises acts of terrorism, as well as a range of

activities specified in Conventions of the United Nations on matters such as hostage taking, threatening

the safety of civil aviation and terrorist bombings, for example.

South Africa also has a structure for recovery of the proceeds of criminal activity that is close to the

height of the evolutionary scale of proceeds of crime models. The South African model comprises

of a conviction-based confiscation procedure as well as a so-called civil forfeiture procedure without

requiring a conviction.

3 All countries are required to set up a financial intelligence unit as set out in Recommendation 26 of the Financial Action Task Force: “Countries should establish an FIU that serves as a national centre for receiving (and if permitted, requesting), analysing, and disseminating disclosures of STR and other relevant information concerning suspected ML or FT activities. The FIU can be established either as an independent governmental authority or within an existing authority or authorities”.


In addition, South Africa has developed a regulatory framework of measures concerning client

identification, record-keeping, reporting of information and internal compliance structures which apply

to a broad range of financial and non-financial institutions through the provisions of the Financial

Intelligence Centre Act, 2001.

Over the past five years South Africa has been involved in a process of developing and bedding

down the structures to give effect to the measures referred to above, such as the development of the

Financial Intelligence Centre and the capacity to investigate and prosecute money laundering cases

as well as to oversee compliance with regulatory measures.

The Republic of South Africa held its first democratic, post-apartheid elections in April 1994. The

institutions of state, as well as within the private sector, have been undergoing a rigorous process of

transformation. This process introduced certain additional vulnerabilities, leaving them open to be

exploited by criminal elements. Thus it was important for Government that there should be a parallel

process to protect the institutions and the system as a whole from crime as government set policies to

reintegrate South Africa’s economy, and more specifically, its financial sector, into the global systems

of trade and finance after years of sanctions and marginalisation. The introduction of anti-money

laundering legislation was a vital component of this process at the time, to be bolstered by anti-terror

financing legislation a short while later.

However, while the process to protect the institutions was underway, a complementary, seemingly

contradictory process, was also at play.

Financial Sector Charter

According to a government-commissioned survey, in 2006 at least 49% of the total adult population

in South Africa was “unbanked”. These people were excluded from formal financial services and

without a bank account or formally excluded from credit. The survey indicated that of those without

access to banking services, 99% were black people, 49% lived in rural areas and 55% were women.

On the one hand there was a danger that the gains of the democratic transition could pass this large

grouping of people by completely, while on the other hand it was important to effect a shift from a

cash-based economy to an economy in which large sections of the population had deep roots in the

formal financial services sector.

The Financial Sector Charter was launched in November 2003, signaling a key milestone in the

transformation of the financial sector and embodies an agreement among the major financial institutions

(such as banks, insurance companies, brokers and exchanges) on a set of service provisions and

empowerment targets. The goal was for the Charter to seek by 2008 to include an additional 8 million

clients (or 80% of people in the Living Standard Measure (LSM) 1 - 5

4) to the existing base of clients

4 The poorest 60% of the population


in the financial sector, taking the total number to in excess of 21 million clients. The Charter seeks

to ensure the broad-based transformation of the sector, based on the following elements: human-

resource development (HRD), procurement and enterprise development, access to financial services,

empowerment financing, ownership, control and corporate social investment.

The importance of this policy objective led to the introduction of an exemption to the FIC Act, thereby

enabling banks to offer a set of services to people who had not previously been banked and whose

income and transaction capacity meant they could be regarded as low-risk clients to the bank.

Importantly, in order to open an account the customer only needed to produce a South African

identity document, without having also to show a utility bill. This provision required that the banks

closely monitor these accounts and ensure that the defined, low-level thresholds do not get exceeded.

If this were to happen then the account must be frozen until the account holder had represented

him-or herself to be identified to the usual requirements. With these controls in place, the new

banking product, called the Mzansi account, was introduced by the major South African banks and

the PostBank on 25th October 2004. By the end of the financial year, Mzansi had led to the creation

of nearly 4 million new bank account holders.

The Financial Intelligence Centre

The Financial Intelligence Centre (the Centre) was established in terms of Section 2 of the Financial

Intelligence Centre Act, 2001 (the FIC Act) 5. The principle objective of the Centre is to assist in the

identification of the proceeds of unlawful activities and the combating of money laundering activities

and the financing of terrorist and related activities. But it does this as an integrated part of a complex

system involving a wide range of different government and business partners.

Other objectives of the Centre include that it: Make information collected by it available to investigating authorities, the intelligence services

and the South African Revenue Service to facilitate the administration and enforcement of the

laws of the Republic; and Exchange information with similar bodies in other countries regarding money laundering

activities and similar offences.

In terms of section 4 of FIC Act the Centre must perform the following functions in order to

achieve its objectives: Process, analyse and interpret information disclosed to it; Inform, advise and co-operate with investigating authorities, supervisory bodies, the South

African Revenue Service and the intelligence services;

5 All countries are required to set up a financial intelligence unit as set out in Recommendation 26 of the Financial Action Task Force: “Countries should establish an FIU that serves as a national centre for receiving (and if permitted, requesting), analysing, and disseminating disclosures of STR and other relevant information concerning suspected ML or FT activities. The FIU can be established either as an independent governmental authority or within an existing authority or authorities”.


Monitor and give guidance to accountable institutions, supervisory bodies and other persons

regarding the performance by them of their duties and their compliance with the provisions of

the FIC Act; and Retain all information received pursuant to compliance with the provisions of the FIC Act.

If the Financial Intelligence Centre Act defined a number of specific objectives for the Centre, the long-

term outcome Government anticipated was that the Centre will contribute to the country’s efforts to

ensure that its financial system has integrity, has stability and that the economy is able to develop to

its full potential, freeing its people from poverty and the legacy of apartheid. Obviously a single piece

of legislation cannot do this, which is why the Anti-Money Laundering and Combating of Financing of

Terrorism (AML/ CFT) system requires that there should be the integration and alignment of several

other laws and processes for it to become successful.

For this to be realised, all those individuals and entities involved in money laundering or terror financing

would need to be successfully prosecuted and that the country could say with confidence that it is

free of these crimes. The role of the Centre is to ensure that the information it is able to provide to

law enforcement authorities is used in a non-partisan manner and for use in cases that can have

high-impact through their successful prosecution. This will require a high degree of compliance and

accountability from all those businesses which are required to implement the provisions of the anti-

money laundering laws as well as report to the Centre. This degree of compliance will be an indication

of the extent to which systemic prevention has been entrenched within the business community.

This requires that the Centre’s mandate and responsibilities are understood by all its partners and

stakeholders. Moreover, business and the general public should be aware of money laundering and

terror financing threats and understand why certain measures are needed to reduce the threats. An

important element of this, which is also a demonstration of compliance, will be for business to ensure that

generally it has systems and capacity to administer its compliance obligations while being able to report

to the Centre. On the other hand, the Centre will need to demonstrate to the law enforcement authorities

that its information is relevant and of high quality and can make a difference to their investigations.

Table 1: The anticipated outcomes from the introduction of South Africa’s AML/ CFT system

RSA financial system has integrity and is stable and the economy develops

Those involved in ML / TF are successfully prosecuted RSA is free of ML / TF

The Centre’s Intelligence is used in non-partisan enforcement in high profile and high impact AML/ CTF cases (Use of Centre outputs)

Responsible, accountable and reporting institutions and businesses comply with AML/ TF requirements (Provision of inputs to the Centre)

Business and the public avoid getting involved in ML/ TF and are not abused by criminals and their networks in this regard (Systematic prevention)

The Centre’s mandate is understood by all the relevant partners

The Law enforcement authorities regard the information from the Centre to be relevant and of high quality

Business and the public are aware of the AML/ CFT vulnerabilities and threats and the need for the prevention thereof

Businesses have the systems and capacity in place to deal with and report on ML/ TF


For South Africa’s anti-money laundering and combating of terror financing system to work, a “generic

value chain” is required, which involves the coordinated and integrated efforts from a wide range of

different partners. These roles are dependent on one another.

South Africa’s AML/ CFT Reporting Architecture

For example, the FIC Act requires that various businesses must comply with the relevant laws, and

therefore need to know their customers and report suspicious transactions to the Centre. The Centre

receives these reports and subjects them to scrutiny. If it deems that there is indeed suspicious

transaction activity, a referral is then made to the relevant authorities for investigation and eventual

prosecution. The steps in the process are dependent on one another. The system as a whole cannot

become fully functional or effective if the different component parts do not properly function as a unit

within this chain (refer to Illustration 1).

The Minister of Finance has mandated the Centre to facilitate and enable the development of a system

to comprehensively combat money laundering and the financing of terrorism.

The Centre has been given the responsibility to act as the pivot in the transfer of information, but also

in ensuring that the total, environment or system becomes and remains functional. This requires a

dynamic partnership approach which facilitates interaction between the private and public sectors. It

also requires that the Centre take responsibility, as the “glue”, for ensuring that the system as a whole

is held together. This is part of an all-of-government approach within South Africa.

International Standard - Financial Action Task Force 40+9 Rs

The Centre

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Illustration 1: AML/ CFT Reporting Architecture in South Africa


Illustration 2: Value chain for AML/ CFT

The “value chain can be illustrated as in illustration 2, where compliant businesses report to the

Centre before the information is used in eventual prosecutions.

The process draws together and coordinates the results of three critical pieces of legislation: the

Financial Intelligence Act, which creates the establishment of the Centre and imposes obligations

on business (in the form of accountable institutions) while providing investigative tools for law

enforcement authorities; the Prevention of Organised Crime Act (POCA), which criminalises the act

of money laundering and creates a penalty regime; and the Protection of Constitutional Democracy

Against Terrorism and Related Activities Acts (POCDATARA Act), which criminalises the financing of

terrorism and creates obligations on businesses to report such suspicions to the Centre.

This mandate requires that the Centre work across sections of business to facilitate partnership

arrangements with various government departments and agencies. The FIC Act requires that the

Centre has a regulatory oversight of the Supervisory Bodies listed in the schedule to the FIC Act to

ensure that they properly monitor the levels of compliance by accountable institutions.

Of particular importance is that an “all-of-government” system be developed to AML/ CFT, which

typically involves far more than only the law enforcement authorities. Within the AML/ CFT

framework various government departments play an important role in this system. For example, the

National Treasury (with responsibility for financial sector policy and remittance matters), Departments

of Home Affairs (identity issues and immigration), Foreign Affairs (United Nations interactions and

foreign policy matters), Social Development (for overseeing issues pertaining to the functioning of

non-government organisations), Trade and Industry (which has oversight for policy and monitoring

of industry sectors such as gambling and real estate as well as the registration of companies), public

entities (for example the PostBank) and others. This is an approach which is required of all countries

by the Financial Action Task Force (FATF) 6 which sets out a list of standards to be met. These

standards are expressed through a series of “Recommendations”, forty which deal with combating

money laundering and another nine for the financing of terrorism. The so-called “40+9” encourage a

range of partnership arrangements, especially within and between various government departments,

entities and agencies.

Prosecuting authorities take to court for

prosecution

Prosecuting authorities

court for prosecution

Law enforcement authorities conduct

investigations

Law enforcement

conduct investigations

The Centre analyses and refers info toinvestigating

authorities

The Centre analyses and

authorities

The Centre receives reports

The Centre

Business makes

SuspiciousTransaction

Reports to the Centre

Business makes

Reports to the Centre

Business is adequately

supervised and is

compliant with laws

6 South Africa became a member of the Financial Action Task Force in June 2003. It had become a member of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) in August the previous year.


These are all important elements of the system which cannot work properly if they are not attended to.

The Centre has interpreted its legal mandate as a series of strategic objectives in which it seeks to: Assist the investigating authorities, intelligence services and the SARS in the identification of

the proceeds of unlawful activities and the combating of money laundering activities and the

financing of terrorist and related activities;

These objectives, responsibilities and obligations contained in South Africa’s anti-money

laundering and combating of financing of terrorism legislation derive from certain United

Nations Conventions and Security Council Resolutions. The Conventions have been translated by

the Financial Action Task Force (FATF) into a set of globally-accepted standards dealing with the

combating of money laundering and financing of terrorism (40 Recommendations against money

laundering and 9 Special Recommendations against financing of terrorism – the “40+9”). The

FATF is composed of 34 countries and of which South Africa became a member in 2003. Thus

far 176 countries have consented to implement and apply the AML/ CFT standards.

The standards require that all countries implement a range of core measures to give effect to the

standards. These include the need for countries to:

Criminalise, in legislation, money laundering and financing of terrorism; and

Implement administrative preventative measures to be taken by financial institutions and

non-financial businesses and professions. These include rigorous reporting requirements (eg

suspicious transactions; terror finance); customer due diligence (Know Your Customer); record

keeping; staff training; and the appointment of a compliance officer. Sanctions are required for

non-compliance.

Law enforcement authorities must have the legal capacity to investigate and prosecute and other

measures; availability of resources.

A financial intelligence unit (such as the Centre) should be established to act as an intermediary

between the private and public sectors facilitating and enabling various relationships. It should

also be enabled to receive data from the reporting businesses, analyse it and refer the results

of the process to law enforcement for investigation when necessary. The Centre is required to

function independently of interference and be fully resourced.

All countries must ensure that various forms of international cooperation are made possible,

including information sharing between financial intelligence units, mutual legal assistance,

extradition, and various forms of technical assistance, including training and support to other

countries and their AML/ CFT entities.

Box 1: FATF 40+9 Recommendations and Standards


Make information collected by it available to these departments and entities to facilitate the

administration and enforcement of the laws of the Republic; and to Exchange information with financial intelligence units in other countries regarding money

laundering activities and similar offences.

These objectives are premised on the Centre’s vision, mission and values.

Mission

To establish and maintain an effective policy and compliance framework and operational capacity

to oversee compliance and to provide high quality, timeous financial intelligence for use in the fight

against crime, money laundering and terror financing in order for South Africa to protect the integrity

and stability of its financial system, develop economically and be a responsible global citizen.

Vision

The Financial Intelligence Centre will strive to be the leading player in the aggressive combating of

money laundering and terror financing to reduce crime for the benefit of South African citizens today

and in the future.

The Centre will earn the trust, respect and support of our stakeholders for the quality of our information,

be recognised for the sustainability of our organisation with the loyalty and achievements of skilled

staff and the success of our efforts.

Values

The values of the Financial Intelligence Centre provide the platform for its future success. The Centre

seeks to ensure that all staff incorporate and utilise these values as a reference for all of their work

and activities. To this end, all of the Centre’s staff will: In the spirit of Ubuntu, demonstrate integrity in everything that we do (with amongst others,

respect, honesty, trust, discipline, humility and loyalty); Demonstrate pride and discipline in our work, accepting accountability and being prepared to

‘go the extra mile’; Strive for excellence and professionalism by effectively making a difference in executing our

mandate by offering solutions, while not presenting problems only; Value individuals and allow space for creativity and growth; Optimise our relationship with stakeholders and partners; and Ensure the security of organisational assets and information.

The Centre makes a serious effort to ensure that these values are continuously integrated into all

aspects of its work.


The Centre became operational on 3 February 2003 at which time banks and other reporting

institutions started reporting to the Centre via electronically. All suspicious transaction reports (STRs),

as per the legislation, is received by the Centre in Pretoria which is South Africa’s national centre for

the receiving, analysing and dissemination of information. Every disclosure received by the Centre

undergoes an initial evaluation process and is assessed against internal rules to identify cases which

have possible money laundering and/or terror financing indicators. Once such an instance has been

identified the matter is allocated to an analyst. Thereafter the intelligence cycle is followed to develop

a tactical / strategic intelligence product.

The Centre does not investigate crime. Rather, the information it produces is meant to support the

existing investigative bodies and other role players in the intelligence and criminal justice system.

During the past 2007/08 financial year, the Centre received 24,580 Suspicious Transactions Reports.

This denotes a 15% increase in comparison to the previous year, 2006/07.

The financial sector submitted 22,411 STR reports to the Centre, which comprises 91% of all reports

received, while the non financial sector filed 2 169 such reports, which is 9% of all reports received.

Compared year-on-year the reporting trend appears unchanged. Of the STR reports received from the

financial sector, 62% were received from money remitters while 27% received were from banks.

The Centre also monitors and gives guidance to relevant entities regarding their compliance with

the FIC Act, which it does in terms of section 4(c) of the FIC Act. The Centre issued guidance on

suspicious transaction reporting for accountable institutions and others (Guidance Note 4 of 13

March 2008) on the manner of reporting and the procedures that should be followed when reporting

(see Box 2 below).

The Centre has access to a variety of sources of financial, administrative and law enforcement

information through a number of mechanisms in order to effectively realise its objective of receiving,

analysing, and disseminating valuable financial intelligence. The primary source of financial

intelligence is STR information the Centre obtains from various accountable institutions, businesses

or people with statutory reporting obligations. In this regard section 28A and section 29 of the FIC

Act are applicable.

This guidance note issued by the Financial Intelligence Centre is divided into six parts and

provides guidance as follows:

Part 1 provides information to help persons determine whether they fall within the category of

persons for whom a reporting obligation under section 29 of FICA could arise.

Part 2 provides information to help persons determine when the obligation to report under

section 29 of the FIC Act arises.

Box 2: Guidance Note 4 on Suspicious Transaction Reporting


The Centre also has both direct and indirect access, by arrangement, to non-publicly available

databases maintained by certain other government departments or government agencies. In these

instances, the Centre depends on the relevant governmental agency maintaining the database to

extract the required information at the Centre’s request. Having the ability to access these sources of

information ultimately adds value to the analysis product of the Centre and can assist law enforcement

agencies to better focus of their investigations.

Part 3 provides information to help persons understand the nature of a suspicion.

Part 4 provides examples of indicators that may be taken into consideration to determine whether

a transaction should give rise to a suspicion.

Part 5 provides information on the implications of making a report under section 29 of the FIC

Act to the Centre.

Part 6 provides a step-by-step guideline to the use of the internet-based reporting mechanism.

Furthermore, the guidance note provides the following information on the manner in which an

STR should be submitted.

A report under section 29 of the FIC Act must be made by means of internet based reporting

provided by the Centre at: www.fic.gov.za. An STR may not be posted. Only in exceptional cases

may an STR be sent via fax or delivered by hand to the Centre. The reporting form is available

from the Centre or its website: Reporters also have the option of submitting STRs via batch reporting. This method

is utilised when high volumes of STRs are submitted to the Centre on a regular basis.

Reports are submitted in bulk to the following email address: [email protected]. In terms of Regulation 23 of the FIC Act there are certain prescribed particulars that

should be contained in an STR. The following basic information should be contained in

an STR: The person or entity making the report; The transaction that is reported; Any account/s involved in the transaction; The person conducting the transaction or the entity on whose behalf it is

conducted; The representative, if any who is conducting the transaction on behalf of

another; and General information concerning the transaction.

The electronic reporting form consists of eight parts numbered from Part A to Part H. It is

imperative to complete all fields in each part that are applicable to the situation which is reported

such as full names and surname of subject, identity number, passport number, addresses and

similar particulars. Reporters are encouraged to supply as much details as they have available

at all times.


The Centre has further direct access to commercial databases that would afford it a variety of

information which offers the Centre access to information pertaining to registered legal entities and

the composition of their governing structures, credit histories of individual and entities, as well as

ownership of property.

Other methods to access information include secondments, Memoranda of Understanding and

information shared with other financial intelligence units via the Egmont secure web. The Centre also

makes use of open sources of information such as internet and the media.

With the ability to access these different types of databases and sources of information, the Centre

is able to produce a balanced product that enables the Law Enforcement Agencies to better focus

on and investigate its targets. The combination of the information from various sources mentioned

above, together with the analysis of STRs and additional documents, enable the Centre to properly

undertake its mandate.

The Centre is therefore entitled to disseminate a broad category of information to domestic authorities

for investigation or action, when the Centre reasonably believes such information is required to

investigate suspected unlawful activity. The Centre is mandated in terms of its objectives under

section 3 of the FIC Act to make information collected by it available to investigating authorities, the

South African Revenue Service and the intelligence agencies.

The FIC Act (section 40) provides for information to be provided either upon the initiative of the Centre

or upon written authority of an authorised officer in these government entities.

The Centre performs analysis on selected STRs before dissemination. The Centre refers a package of

information, which will normally includes the demographical profile of the subject, banking exposure

and transacting pattern with specific reference to any unusual or suspicious transacting, corroborated

with specific examples to this effect. Information referred to domestic authorities therefore includes

the Centre’s analysis and interpretation of the reported information and where possible, substantiated

conclusions regarding possible involvement with certain predicate offences. This is done with the

understanding that information provided should be integrated into the intelligence bases of the

domestic authorities and investigated in line with their respective mandates.

An assumption is often made that every STR which is reported to the Centre automatically leads to

a referral from it to the investigating authorities. This is not the case. Typically, the Centre’s reports

may involve information from a number of STRs reported over time, where there is some underlying

link to the information reported. The possibility even exists that information from a particular STR

may be referred to law enforcement on more than one occasion.

In addition to disseminating self-initiated reports to domestic law enforcement authorities, the Centre

also supplies information drawn from STR’s to law enforcement upon request from a particular


agency. Normally this information is required to be used in a pending investigation. All requests

must be made by an appointed Authorised Officer so that the legal obligations are met and to ensure

integrity of the requesting process. The Centre is kept informed of the current Authorised Officers in

the domestic authorities and provides training to them to ensure that the integrity of information is

maintained even during the investigation stage.

The Centre is created as a statutory body with legal personality and operates outside the public

service but within the public administration, as envisaged in section 195 of the Constitution of the

Republic of South Africa, 1996 . It is registered as a section 3(a) entity in terms of the Public Finance

Management Act.

This status enables the Centre (as per section 5 of the FIC Act) to develop its own policies and

frameworks, such as remuneration and determine its staffing and skills requirements.

The Director, who is the accounting authority for the Centre, reports directly to the Minister of Finance

and to Parliament for the performance of the Centre. The Director of the Centre has the authority

to take all decisions of the Centre in the exercise of its powers and the performance of its functions.

The Director shall however perform these functions subject to any policy framework which may

be prescribed by the Minister. Consequently the Centre only provides strategic information to the

Minister and policy makers.

The sources of the Centre’s funds are restricted by law to money appropriated annually by Parliament

for the purposes of the Centre, any government grants made to it and any other money legally acquired

by it. The Centre may accept donations only with the prior written approval of the Minister.

The Centre is not an investigative agency and does not form part of any of the local law enforcement

agencies or the domestic intelligence community.

The Centre’s reputation depends on the integrity, accuracy and reliability of the information it receives

and that which it disseminates. It has therefore put in place a number of risk mitigating measures to

guard against violations of information integrity.

Dissemination of information is legislated in section 40 of the FIC Act. It provides for the dissemination

of information to investigating authorities, the South African Revenue Service and intelligence services.

It also provides for the dissemination of information to entities outside the Republic which performs

similar function as to those of the Centre.

It also clearly stipulates who is entitled to request information from the Centre and defines the

requirements to access information from the Centre.

To ensure that the Centre disseminates information in accordance with the relevant legal provisions,

referrals of information must be approved by the Director or a designated Senior Official of the Centre


and be collected by an authorised officer of the recipient agency. This is a controlled process where

the authorised officer has to formally acknowledge receipt of the product. Another mode of delivery is

the secure Egmont website which enables information exchange amongst the Egmont members.

The Centre releases information, including the Annual Report, which is published on the Centre’s

website at www.fic.gov.za. The Annual Reports contain information on the following: The number of requests received from local and international stakeholders; The number of STRs received from accountable institutions; and The number of referrals disseminated to various domestic authorities.

The Centre’s Annual Report is another valuable source of feedback to accountable institutions.

The Centre also conducts stakeholder feedback sessions with various stakeholders to discuss past

activities, challenges and successes, emerging trends and typologies, with a view to improving their

anti-money laundering efforts and future cooperation. In addition the Centre provides public feedback

by means of an electronic query facility. Members of the public can make enquiries relating to the

FIC Act and the Centre via the Centre’s website. A response is forwarded within five (5) days of the

initial query. During this financial year the Centre responded to 368 queries.

The Centre became a member of the Egmont Group of Financial Intelligence Units in 2003. In

doing so the Centre agreed to the adherence of the principles laid out in the Egmont Group Charter.

The Centre supports the widest possible co-operation and exchange of information amongst Egmont

members. This is done on the basis of reciprocity or mutual agreement and following the rules

established in the Egmont Principles of Information Exchange. To give effect the above, the Centre

promotes: free exchange of information for purposes of analysis at FIU level; no dissemination or use

of the information for any other purpose without prior consent of the providing FIU; and protection of

the confidentiality of the information. Furthermore the Centre’s decision to exchange information is

not affected by the status of other FIU’s.

The Centre is steadily increasing the number of Memoranda of Understanding that it has with its

FIU counterparts within Egmont. In addition to the sharing of information with Egmont Group

members, the Centre has also entered into agreements on the sharing of information with the financial

intelligence unit of Zimbabwe, which is not an Egmont member. As more FIUs are established in the

region, so the Centre is likely to develop the ability to cooperate with them and sign agreements for

the exchange of information.

Communication between the Centre and other countries takes place directly via the Egmont Secure

Web without the interference of any intermediary bodies. Requests from counterpart FIU’s are dealt

with in the same manner as a domestic disclosure, but as a matter of higher priority. All international

requests are submitted in compliance with the Principles for Information Exchange that have been set

out by the Egmont Group, considering provisions of information sharing arrangements as set out in

agreements amongst the Centre and other FIU’s.


Structure and Activities by Department for 2007/08The Centre is structured into several business units:

The management of the departments and business units within the Centre meet regularly as a

management executive to oversee the effective performance of the organisation, to share information

and to coordinate its activities. For the Centre to achieve its various mandates and to perform against

its strategic objectives, it strives to ensure as much interaction and cooperation between the work of

the various departments.

Legal and Policy Department

The work of the Legal and Policy Department covers three major areas of responsibility: Administration of the FIC Act; Engagement with international and regional policy forming and standard-setting organisations

(such as the FATF); and Provision of policy advice on matters of a strategic nature concerning money laundering and

terrorist financing.

The Centre has been working on amendments to the Financial Intelligence Centre Act and holding

discussions with a number of different affected partners, including the National Treasury, the South

African Reserve Bank and its Banking Supervision Department and the Financial Services Board. The

amendments were submitted to Cabinet for approval during the year under review and will be tabled

in Parliament during the next financial year (2008/09). The effect of the changes will be to introduce

an administrative sanctions regime for supervision in respect of AML/ CFT. The amendments envisage

that all Supervisory Bodies within the FIC Act framework, including the Centre itself, are likely to

have the powers to enforce their responsibilities currently set out in the FIC Act. This will provide

them with the ability to conduct inspections to assess compliance by accountable institutions and

to impose penalties ranging from remedial actions to a fine (maximum of R10 million). A penalised

business will be entitled to lodge an appeal with a panel to be established by the Minister. In the

amendments the Centre has been tasked with providing administrative support to the appeal process

and the functioning of the panel.

Office of the Director

Legal and Policy Department

Compliance and Prevention Department

Monitoring and Analysis Department

Administration and Support Services Department


Consultations in respect of the amendment of the Schedules were held with six Provincial Licensing

Authorities: the Gambling Boards for the Free State, Western Cape, Mpumalanga, North West, Kwa-

Zulu/Natal and Limpopo provinces. Discussions were held with the South African Reserve Bank on

the way forward in respect of amending the reference to the SARB in Schedule 2 of the Act in order to

clarify and make more specific the responsibilities of the different departments within the SARB that

have a role within the national AML/ CFT framework. Meetings were also held between the Centre

and the following stakeholders in respect of the process to amend the Schedules: the Land Bank; the

Independent Regulatory Board of Auditors; and the Department of Trade and Industry (in respect of

the Estate Agency Affairs Board’s role as a supervisory body).

The Legal and Policy Department has continued to coordinate the Centre’s involvement with the FATF

and the ESAAMLG and has facilitated its involvement in various meetings. Officials from the Centre

attended the three FATF plenary meetings held annually (in June 2007, October 2007 and February

2008). In addition, an inter-sessional meeting of the FATF Working Group on Money Laundering and

Terror Financing was attended during May 2007.

The Centre also ensures that all South African delegates to these meetings are properly prepared for

the various discussions to be held at the FATF meetings. Thus it coordinated documented input for

the FATF Working Group on Terrorist Financing and Money Laundering on Special Recommendation

III and for Trade Based Money Laundering in preparation of the June 2008 Plenary meeting. Officials

from the Centre also attended a conference on developing a Risk Based Approach to AML/ CFT.

Members of the Centre participated in the FATF Mutual Evaluations of Canada, as well as the United

Kingdom, both of which required several follow-up meetings.

The Legal and Policy Department also initiated the preparations for the South African Mutual

Evaluation process, which will see an on-site assessment by the FATF and ESAAMLG assessors

in August 2008. South Africa will undergo an assessment (a mutual evaluation) of its system to

combat money laundering and terrorist financing. The objective of the mutual evaluation will be to

assess the adequacy of the South African legal framework to combat money laundering and terrorist

financing, as measured against the international standard of the FATF’s 40 Recommendations on

Money Laundering and 9 Special Recommendations on Terrorist Financing, as well as the effective

implementation of the South African legal framework by its competent authorities.

The Centre has been involved in raising awareness of the evaluation process and the applicable

standards among the South African authorities which will be assessed in the course of the mutual

evaluation process. This also entails assisting those authorities to prepare for their role in the

evaluation process.

A series of preparatory workshops were held during the year to initiate the processes to prepare for

the mutual evaluation and demonstrated a number of deficiencies, particularly the need for greater


awareness amongst the authorities of their responsibilities as well as pointed out the need for greater

coordination. In the course of the process reports are made to Cabinet to inform members of progress

being made.

The Legal and Policy Department has also coordinated South Africa’s involvement in the Eastern

and Southern Africa Anti-Money Laundering Group (ESAAMLG) activities. A senior official from the

Department participated in an ongoing process over the year to improve the efficiency of the ESAAMLG

Secretariat and assisted with the compilation of a typology questionnaire on a cash courier project.

Preparations have been made to deploy an official from the Centre to the ESAAMLG Secretariat during

the forthcoming year.

Officials from the Centre accompanied the Deputy Minister of Finance to the 7th ESAAMLG Council of

Ministers meeting held in Gaborone, Botswana in August 2007 and participated in the March 2008

ESAAMLG Task Force meetings of Senior Officials which were held in Dar-es-Salaam, Tanzania.

The Legal and Policy Department coordinated the Centre’s activities to provide technical assistance

to countries of the region during the year. This involved assistance to the Ministry of Finance in

Mozambique in the setting up of its Financial Intelligence Unit and included training workshops and

signing of a Memorandum of Understanding with the Mozambique Department of Finance.

Other technical assistance also took place during the year: a presentation was delivered on “Financial

Analysis and Dissemination of Information” for a financial intelligence unit capacity-building workshop

which took place in Botswana in February 2008. The Centre also hosted visits for delegations

from Mozambique, Lesotho, Malawi, Tanzania and Namibia at different times during the year, which

included workshops and training on various matters of establishing a financial intelligence unit as well

as on the roll-out of AML/ CFT legislation.

An official from the Centre presented a part of the IMF assessment report on Mauritius’s AML/ CFT

system to the ESAAMLG Plenary meeting in August last year, while another participated in conducting

the Mutual Evaluation of Seychelles.

Compliance and Prevention Department

The work of the Compliance and Prevention Department is to focus on compliance oversight of

the FIC Act. A core function is to inform, advise and collaborate with the supervisory bodies to

ensure their effective supervision of compliance. Another function is to liaise with accountable and

reporting institutions to assist them in applying and implementing the compliance provisions within

their respective institutions. The preventative focus includes a strong public awareness outlook for

the general public, the issuance of guidance notes for accountable institutions and the provision of

compliance training on FIC Act obligations to affected entities. The work of this department requires

a close liaison with our colleagues inside the Centre on compliance-related issues and externally with

the supervisory bodies and accountable institutions.


During the period the Compliance and Prevention Department formulated guidance in draft form in

several areas, which guidance will be finalised in the next financial year. The draft guidance under

preparation include guidance related to the casino industry, estate agents, and know-your-customer

requirements for non-banking financial institutions. The Guidance Note on suspicious transaction

reporting by accountable institutions was published in the government gazette on 13 March 2008.

The Compliance and Prevention Department has also been at the forefront of developing a framework

to implement a risk-sensitive approach to AML/ CFT compliance in the South African regulatory

environment. Such an approach is nearly complete and, after interaction with the FATF to ensure

that global standards and approaches are being complied with, there will be engagement with various

institutions to ensure industry is involved in the process. In this regard, the head of the department

was invited to attend and chair a sector working group at the FATF Private-Public sector industry on

the risk-based approach in Berne, Switzerland, on 11 December 2007.

The Department has also developed an implementation framework for the FIC Act amendments

which provides for the Centre’s capacity requirements and budget. It is also developing an approach

to ensure the inspectorate process is accompanied by rigorous procedures and manuals and that the

process can withstand rigorous legal scrutiny.

The relationship between the Centre and the various supervisory bodies has been steadily strengthened

and there is a growing cooperation and sharing of information between them. These include the

Estate Agency Affairs Board, the National Gambling Board, the Banking Supervision Department of

the Reserve Bank, Law Society of South Africa, the Companies and Intellectual Property Registration

Office, the Financial Services Board and the JSE Exchange.

In the process of these interactions this year, the Compliance and Prevention Department has

facilitated for the Centre to sign Memoranda of Understanding with the National Gambling Board,

Estate Agency Affairs Board, the Independent Regulatory Board of Auditors and the Companies and

Intellectual Property Registration Office. These MOU’s set out the basis for cooperation and the

shared responsibilities between the different parties.

The Compliance and Prevention Department has been involved in ongoing interactions with various

supervisory bodies, including the conduct of on-site joint compliance reviews over the past three

years, as reflected in the table and graph below. They show that the monitoring of compliance has

increased significantly in the year under review

In the period under review, the Compliance and Prevention Department conducted a series of joint

audits for FIC Act non-compliance with several supervisory bodies, These include 24 on-site visits to

casinos together with the National Gambling Board and visits to 42 bookmakers. The department

conducted 13 reviews of estate agents together with the Estate Agency Affairs Board, while it

conducted 25 joint reviews with the Exchange Control Department of the South African Reserve Bank

of Authorised Dealers in foreign exchange with limited authority (ADLAs).


In addition, together with the Financial Services Board, the Compliance and Prevention Department

conducted joint on-site reviews for FIC Act non-compliance of 52 insurance companies, 26 financial

service providers, and 24 collective investment scheme managers, as well as 6 on-site visits of JSE

members.

With the consent of the Post Office bank, the Compliance and Prevention Department conducted

independent on-site audits of 27 Postbank branches across Gauteng province.

While these joint audits were being undertaken, the Banking Supervision Department of the South

African Reserve Bank had independently consolidated its process to monitor AML/ CFT compliance

matters amongst the country’s banks. This process has led to regular meetings between the Centre

and the BSD to report on progress and share information. The Centre uses these meetings as a

platform to provide the BSD with information regarding the reporting by banks to the Centre and an

assessment of the quality of such reports.

The general comment is that there is a broad measure of compliance across all sectors which has

resulted in “partially compliant findings”. The identified areas for remedial action by accountable

institutions will now be monitored by the lead supervisory bodies and supported on request by the

Compliance and Prevention Department.

As a result of many of the on-site visits, the Centre has conducted a series of compliance remedial

training sessions. For example, the Compliance and Prevention Department provided remedial

training to bookmakers in Mpumalanga, Free State and North West provinces; it conducted training

programmes at 10 imbizos held by the Estate Agency Affairs Board held around the country and a

national group of estate agents; training of collective insurance schemes managers; and a workshop

of attorneys in NorthWest Province. These sessions were accompanied by presentations made to

various workshops and conferences.

It was agreed by all supervisory bodies that the joint on-site review process of accountable institutions

by the relevant supervisory body and the Centre, as represented by its Compliance and Prevention

Department, will continue for the foreseeable future. The value derived is not only in the findings

themselves, but in the development of inspection expertise, the sharing of AML/ CFT knowledge and

the sharing of information by the individual assessors. The Centre believes the process of joint audits

or inspections continues to create a solid platform for the period after the FIC Act Amendment Bill

process has been completed and the new responsibilities take effect. At that stage the supervisory

bodies will be expected to have their own capacity to conduct compliance inspections.

Table 2 overleaf reflects the growing involvement of the joint on-site review process and the firming

of the partnership between a supervisory body and the Centre to together make South Africa a more

compliant nation in the area of AML/ CFT compliance.


Industry / Sector Supervisory Bodyunder FIC Act

Number of Reviews

2006/07 2007/08

Casino industry National Gambling Board (NGB)

27 24 joint on-site reviews with the NGB

Bookmaker industry NGB 42 joint on-site reviews with the NGB

Estate Agents Estate Agency Affairs Board (EAAB)

8 13 joint on-site reviews with the EAAB

Authorised Dealers in Foreign Exchangewith Limited Authority

The Exchange Control Department (now known as the Financial Surveillance Department) of the South African Reserve Bank (FSD)

16 25 joint on-site reviews with the FSD

Insurance companies Financial Services Board (FSB)

0 52 joint on-site reviews with the FSB

Financial Service Providers

FSB 0 26 joint on-site reviews with the FSB

Collective Investment Scheme Managers

FSB 0 24 joint on-site reviews with the FSB

Authorised Members of the Johannesburg Stock Exchange (JSE)

JSE Limited 0 6 joint on-site reviews with the JSE

Post Office Bank branches

Financial Intelligence Centre

0 27 on-site reviews conducted by the FIC

Total 51 239

Table 2: Compliance reviews conducted during the period April 2006/07 to March 2007/08

FY 2006/7

FY 2007/8

60

50

40

30

20

10

0

Cas

inos

Boo

kmak

ers

Est

ate

Age

nts

AD

LAs

Insu

ranc

e C

ompa

nies

FAIS

CIS

Man

ager

s

JSE

Post

Ban

k


The Compliance and Prevention Department has also met with the Pretoria Masters Office on matters

involving access to deeds registers. The Department has met with or interacted with thirty-eight of

the country’s banks.

The Centre commented on and advised the Minister of Finance on matters affecting AML/ CFT

policy and the implementation thereof and provided him with several briefing notes. It also advised

the National Treasury on the impact of the draft Cooperative Banks Bill on the FIC Act and the

Department of Trade and Industry on the National Gambling Act amendments and the interpretation

of the customer due diligence requirements in respect of suretyship arrangements, as well as the

Department of Foreign Affairs in its interactions with its country counterparts.

The Centre is pleased to report on the following successful prosecution involving an accountable

institution for non-compliance under the FICA.

State v Maddock Inc (accused 1) and Graham Allen Maddock (accused 2)

Accused 1 – Maddock Inc.

Count 105: Failure to identify persons in contravention of section 46(1) read with section 21

of the FIC Act.

Count 106: Failure to keep records in contravention of section 47(a) read with section 22 of

the FIC Act.

Count 107: Failure to formulate and implement internal rules in contravention of section 61

read with section 42(1), 42(2) and 42(3) of the FIC Act.

Count 108: Failure to provide training in contravention of section 62(a) read with section 43(a)

of the FIC Act.

Count 109: Failure to appoint a compliance officer in contravention of section 62(b) read with

section 43(b) of the FIC Act.

Penalty received in relation to Count 105 to 109: a fine of R10 Million wholly suspended for 5

years.

Accused 2 – Graham Allen Maddock

Count 54 to 103: failure to report suspicious and unusual transactions in contravention of

section 52 read with section 29 of the FIC Act

Penalty received in relation to Count 54 to 103: six years imprisonment of which three years’

imprisonment is suspended for five years.

Box 3: First successful prosecution: FIC Act non-compliance charges


The Centre was also involved in clarifying the relationship between it the investigating authorities and

the Special Commercial Crimes Courts which prosecutes various forms of commercial crime and the

Centre, attended a workshop with SCCU involving about 50 delegates. The department was part of

the workshop preparation and provided significant input.

The Director addressed the National Gambling Board and members attended a workshop to discuss

the compliance implications for the casino industry of the FIC Act.

The Centre also provided advice and input for the Financial Regulatory Symposium and the process to

develop a more coordinated approach to enforcement matters across the financial sector.

The Compliance and Prevention department also runs the public queries section for the Centre,

through which the Centre provides public feedback by means of an electronic query facility. These

have also formed the basis for the Centre’s Frequently Asked Questions (FAQs), which are posted on

our website. Members of the public can make enquiries relating to the FIC Act and the Centre via the

Centre’s website through the “Feedback” e-mail link. The Compliance and Prevention department

is working toward issuing a response within five (5) days of the initial query. During this financial

year the Centre responded to 368 queries, which is lower than the 404 queries raised last year by

members of the public. This may well be a sign that a better understanding of the FIC Act is being

embedded in our society.

Monitoring and Analysis Department

The Monitoring and Analysis Department receives information from reporting and accountable

institutions relating to alleged money laundering and terror financing activities. The department also

receives spontaneous disclosures from international counterparts and members of the public. The

information is then stored, analysed, contextualised and distributed to law enforcement authorities

and intelligence agencies where further investigation is deemed necessary. This department also

receives and responds to both international and domestic requests. In addition, the department also

maintains relationships with law enforcement authorities and conducts feedback sessions, as well as

training interventions, such as that for authorised officers or for financial investigators.

The Monitoring and Analysis Department has developed rigorous procedures for the receipt of

information and the authorised process of adding value to it before referring anything to the law

enforcement authorities for investigation. These procedures are being incorporated into the new IT

system which the Centre is busy developing.

The information received from STRs has proved to be invaluable to the Centre in constructing

comprehensive and detailed financial profiles of individuals and entities that are suspected of being

involved in organised crime, tax evasion, violent crime and suspected financing of terrorism. The

information received has allowed the Centre the ability to forward regular and comprehensive intelligence

pictures to the security and law enforcement agencies within the Republic. The Centre has also been


able to trace previously undetectable financial links between these individuals under investigation and

their associates. Feedback received from the recipients of these referrals has confirmed the vital role

of the Centre (and by implication the reporting institutions), in assisting the South African government

in fulfilling its obligations in terms of the global efforts to combat AML and CFT.

Analysis of Suspicious Transaction Reporting to the Centre

Suspicious Transaction Reports made to the Financial intelligence Centre

Financial Year No of STRs Accumulated Total

2002/ 2003 991

2003/ 2004 7 480 8 471

2004/ 2005 15 757 24 228

2005/ 2006 19 793 44 021

2006/ 2007 21 466 65 487

2007/ 2008 24 580 90 067

An analysis of these reports has shown the following information

The reporting institutions made 24,580 Suspicious Transactions Reports to the Centre between 1

April 2007 and 29 February 2008, which denotes a 15% increase in comparison to 2006/07.

Of these, 62% of the reports were received from money remitters, while 27% received were from

banks.

In the financial year 22,411 reports were received from the financial sector constituting 91% of all

reports received. The non-financial sector filed 2,169 reports, constituting just 9% of all reports

received.

The Centre created 999 referrals which were disseminated to investigating authorities, which denotes

an 83% increase in comparison to 2006/07.

Financial

Non-financial

91%

9%25000

20000

15000

10000

5000

0

2006/2007 2007/2008

2667 2169

12% 9%

91%88%

1879922411


The financial value of the referrals made by the Centre to the investigating authorities was an

estimated R2,032,452,257.01(excluding spontaneous disclosure), which denotes a 441% increase

in comparison to 2006/07.

The Centre made 3 spontaneous disclosures, the value of which was R3,662,867.50.

This progress is illustrated in the graph below, which compares these statistics over the past two

years

1000000

10000

100

1STRs

Received

21466

Referrals disseminated

(including spontaneous disclosure)

Financialvalue of

referrals inmillions

(including spontaneous disclosures)

Interventions Financial value of

interventions in millions

Sec 27 Sec 32 International request

Domestic request

83%

24580

15%

441%

54

9 10

02

R 3

76

.26

MR

2,0

36

.12M

R 1

.55

M

75%

4 4

R 2

.7M

158%

10

69 2

76

341%

53

3 75

261%

49 7

9

22%

26

9 32

7

2006/2007 2007/2008

0%

The Centre performed 4 interventions in terms of section 34 of the FIC Act. The number of

interventions remain unchanged in comparison to 2006/07, while the financial value of interventions

was R2,700,000.00, which indicates a 75% increase in comparison to 2006/07.

The Centre performed 2,763 queries using section 27 of the FIC Act, which denotes a 158% increase

in comparison to 2006/07.

The Centre made 752 requests for additional documents to accountable institutions which denote a

41% increase in comparison to 2006/07.


The Centre received 406 requests for information, of which 79 were form international counterparts,

denoting a 61% increase. There were 327 domestic requests for information, denoting 22% increase

in the use of the Centre’s information.

The Monitoring and Analysis Department is now also actively developing typologies studies and trends

indications based on the information at its disposal. Trends and typology analysis is an important

exercise in the pursuit of understanding the indicators associated with money laundering and the

financing of terrorism.

The Centre was involved in previous typology research work, which had identified the purchase of

properties and goods, the establishment of companies and trusts for laundering the proceeds of crime,

the misuse of businesses, the use of casinos, and using the informal, cash-based sector as all being

methods used by criminals to hide or launder the proceeds of their crimes. The money laundering

investigations that occurred during the initial period of the Centre’s establishment involved predicate

offences of fraud, theft, corruption, racketeering and gambling. However, this early typologies

research was not undertaken as a rigorous research process, being based on media stories, personal

recollection and other information.

In 2007 the Centre decided to adopt a more rigorous method for developing typologies and future

trends research based on the reports made to it and feedback from the law enforcement community.

Over the past 4 years the Centre has been accumulating data not only from STRs but also from

various law enforcement investigations and other sources to initiate a trends and typologies research

process. The Monitoring and Analysis Department has consequently developed trends and typologies

indicators based on factual occurrences that have been reported to the Centre and investigated by

law enforcement agencies. The results of this activity will be made available to the Centre’s various

counterparts and the reporting community during the next financial year (2008/ 2009).

The Monitoring and Analysis Department continues to work closely with the law enforcement

authorities. This primarily involves efforts to facilitate the coordinated distribution of information

from the Centre for investigations and to respond to requests investigators might have involving their

investigations. As part of this activity the Department conducted several different training sessions to

a total of 87 members of the South African Police Service, the Directorate of Special Operations and

the National Prosecuting Authority, focusing on financial investigations, the role of authorised officers

and discussing emerging global trends identified by FATF and Egmont.

Over the next financial year the Centre will commence a process to give its various counterparts, in

business as well as in the law enforcement field, better quality feedback and direction with respect

to money laundering typologies and trends that have been identified domestically. This information

will be matched to data available to the Centre from other sources. The results of this activity will

be made available to the Centre’s various counterparts and the reporting community during the next

financial year (2008/ 2009).


Administration and Support Services

The Administration and Support Services provide the infrastructure to support and enable our work in

the Centre. The primary functions within this division include those of office management, financial

and administrative management, procurement and supply chain management, human resources,

registry and document storage services, in-house staff training and development, security services,

marketing, in-house legal services and information and communications technology.

IT development

Information Technology development

The Centre developed and installed an Information Technology (IT) system upon its establishment in

2003 to enable it to receive reports, analyse these and interact with various other sources of data for

various value-add activities to the information it receives. National Treasury at the time provided the

IT infrastructure and the enterprise management system. However, during the financial year under

review the Centre initiated the process to migrate many of its users onto the Centre’s own independent

system, which will become the backbone of the new system it rolls out over the next two years.

The Centre in 2006 initiated a rigorous and detailed project to envisage, scope and develop the

specifications for an enhanced independent IT system intended to serve and provide capability to

the Centre for the next decade. The infrastructure design and architecture process for the Centre’s

IT system has now been completed and the Centre has embarked on the next stage of the process,

which is to build the new infrastructure. Both the “what” and “how” of the solution portfolio has been

defined. The technology foundation for the Centre is based on the adopted open group architecture

framework.

The process to develop the Centre’s new technology communications and infrastructure is an iterative

one, with solution benefits realised at different stages of deployment.

This process will happen over a three year period, at the end of which the Centre shall have a highly-skilled

staff of information technology experts able to maintain and further develop the system as it grows.

Early this year members of the Centre undertook a study visit to the Canadian Financial Intelligence

Unit (FINTRAC) to consider its IT system, a model which the Centre considers to be similar to that

which it is developing. The visit confirmed for the Centre the direction we have taken to design and

build the Centre’s IT system. The key findings by the team include: Maximisation of electronic reporting; Ongoing focus on data quality; Significant focus into the security aspects of the systems; and Strict security policies exist to manage the flow of information and security of data.

The Centre’s new and detailed IT infrastructure design has been through a peer review process by two

of the Centre’s technical partners, which have confirmed that the proposed architecture is based on


business objectives, user requirements and sound technology choices. The application architecture

specifications have been completed and have been reviewed for base lining. The next major transition

point in the development of the Centre’s IT system is to initiate the “build” phase.

Financial Management

The budget of the Financial Intelligence Centre is developed and determined by the Centre itself, in

accordance with all section 3(a) public entities registered and operating in terms of the Public Finance

Management Act. This process happens as part of a three-year planning cycle which includes the

formulation of strategic goals which are matched against annual performance reporting.

The Centre, through the Director, who is also the accounting authority for the Centre, is required to

provide Parliament with its three-year strategic plan for approval. The Centre is also required to report

to Parliament on its performance on an annual basis.

Like any other government department or entity, the Centre is required to develop its strategic

planning priorities and estimated expenditure as projected over a three-year period. The decision to

allocate funds to the Centre is made as part of Government’s annual budgetary process. The Centre’s

strategic plans identify and map areas of new work within the rolling three-year cycle, which are then

submitted to the Minister of Finance for approval, followed thereafter by official publication. The

plans in themselves do not guarantee funding.

When Parliament passed the FIC Act in 2001 it allocated R12 million for use by the Centre in its

first financial year, followed by R35 million in year two and R37 million in year three. However, it

is important to note that these allocations were made prior to an implementation plan having been

developed and before the Centre had yet been established. The Centre did not utilise the funds that

had been allocated it by Parliament which were subsequently rolled-over to the following years and

the Centre quickly had a surplus of R74 million which then had to be managed down to a zero-sum

baseline before it could qualify for further funds.

As the Centre created infrastructure and employed staff, so the original funds allocated were fully

utilised during the 2006/07 financial year. National Treasury has granted the Centre an additional

R44 million for 2008/09, most of which is being utilised for IT infrastructure development and staff

expansion.

The Centre has been physically located within in the National Treasury building since its establishment.

However, it has “outgrown” the available space and is in the process of re-locating to its own,

customised premises, where it will become fully responsible for its IT infrastructure and all facilities

management issues.

The Auditor-General gave the Centre an unqualified audit report for the 2007/08 financial year.


The Centre’s management has noted the comments made by the Auditor-General in his 2007/08

audit report regarding the fact that the strategic plan includes non-service delivery information.

Management decided to include the relocation of its premises as this would require significant effort

over the period under review, as well as introduce elements of risk. Management also noted the

reference to the inclusion of additional performance information that did not form part of the strategic

plan. It regards this additional information as an important indicator of the extent to which the Centre

has been successful in achieving its objectives during the time period under review.

Management notes that the amount used for the materiality and significant framework was set at

a low level of R200,000.00, compared to that determined by the Auditor-General. The material

amount used was set by management based on non occurrence of any financial and/or non-financial

misconduct for the past years from commencement to date. In future this amount will be determined

in consultation with the Audit Committee to ensure that is free from management subjectivity. This

will also be in line with the Committee’s report included in the Annual Report.

The Centre’s result for the year under review is characterised by management’s commitment to building

a sustainable organisation, significant corporate activities and the restructuring of the balance sheet.

Driven by its ongoing growth as it seeks to establish itself, the Centre managed down and depleted the

previous year’s accumulated surplus on the balance sheet. The following review provides insight into

the Financial Position and Financial Performance of the Centre for the year under review.

The Centre had been granted approval to retain surplus funds that were held over from the inception

of the Centre to the year 2006/07. The Centre’s cash and cash equivalent was reduced from

R32,3 million to R1,6 million to partly fund Capital Expenditure of the partial move to suitable new

office premises that resulted in acquisition of significant property, plant and equipment (PPE), tenant

installation costs of R7,7 million. The Centre continued to make progress with the implementation

of the Centre’s Communication and IT system (FICCITS) which led to the acquisition of computer

software and hardware amounting to R13,9 million.

The Centre’s payables increased by 116% from the previous year due to the significant cost of

setting up its new offices at Centurion which commenced in mid October 2007 in preparation for

functioning in April 2008. Management also reviewed the useful life of the Centre’s property, plant

and equipment which resulted in a significant change estimated to R1,6 million, thus increasing the

net book value.

Financial Performance

In the light of the Centre having to deplete the accumulated surplus, the allocation for 2006/07

amounting to R32m was forfeited for better use in other government initiatives. This year it received

an allocation of R42,4 million, which is clearly below the actual spending trends of the Centre.

Nonetheless, the Centre has recruited Human Resources as planned, which resulted in an increase

of 58% from the previous financial year. Its corporate governance activities have also increased,


which are also evident in the increased Audit Committee fees which are significantly up from the

previous financial year. The number of meetings increased and interaction with management has

also improved significantly.

Governance Activities

Management has shown commitment to continued enhancement of the Centre’s governance framework

and in addition to the existence of the Audit Committee and Internal Auditors. It has reviewed its

Risk Strategy and is pursuing a rigorous implementation of risk management. The Centre’s Annual

Financial Statements have also disclosed the nature of risks that the Centre is faced for the year under

review and moving forward.

For Supply Chain management activities there is commitment from management to sit in all required

committees that will ensure transparent, equitable, fair and competitive provisioning.

The financial year 2008 has been extremely challenging and a rewarding one for the finance and

procurement team whose dedication and commitment does not go unnoticed.

Human Resources

During the year under review, the Human Resources Department focus was on recruitment, and on

enhancing human resources administration processes and systems. A total number of 59 employees

were employed during the year, most of them into new positions as the Centre seeks to reach its

first threshold for its establishment. In line with the Centre’s vision to empower and develop staff, a

bursary policy was adopted and implemented, 29 employees were granted bursaries.

In the coming year, the focus will be on developing certain key retention strategies aimed at motivating

and retaining staff. This includes producing a framework for learning and development of each staff

member, designed to ensure all staff are confident of being able to contribute to the achievement

of the Centre’s strategic objectives. A talent management strategy will be developed to focus on

identifying talent that is critical to the Centre’s sustainability.

The Centre’s staffing levels for the first operational years are indicated in the figure below

140

120

100

80

60

40

20

02003/2004 2004/2005 2005/2006 2006/2007 2007/2008


During the past year the Centre provided a wide range of generic workplace skills training, as well

as specific training suited to the particular workplace situation. These are indicated as examples in

the table below.

Training Focus Skills No. of staff

Compliance skills Corporate governance 18

National Credit Act

Compliance theory

Analysis skills Analysis IT tools 24

Analysis application theory

Strategic analysis

Legal issues Interpretation of statutes 3

Contract law

Econometrics

Management skills Conflict and diversity 42

Management skills development

Supply chain management

Mentoring

Administration skills Secretarial and Administrative skills 75

Administrative management

Office professionals

Microsoft office suite

Business and report-writing

Life skills Customer service 65

Telephone and voice skills

Presentation skills

Time management

Information and Technology skills Ibase user training 21

ITIL foundation course

Computer forensic and investigative

Anti-Money Laundering issues Analysis of ML/ TF workshop 34

AML and financial crime seminar

Border Control Africa seminar

ML and organised Crime conference

Location and Facilities

It is expected that the Centre’s staff complement will grow rapidly over the three year period under

review. It has therefore become imperative to find suitable accommodation to house staff and


to provide the necessary workstations. This expanded space is not available within the National

Treasury building in which the Centre is presently accommodated. The approach to resolving the

accommodation needs has been divided into two parts: Interim accommodation for a portion of the Centre’s staff and the anticipated expansion; and Long term relocation of the complete Centre into a single facility.

A lease agreement has been signed for additional interim office accommodation in Centurion to

provide for immediate office space, with plans for future consolidation in single premises in 2010/

2011.

Way Forward

The Centre has grown rapidly over the 5 years of its establishment, yet it is not operating at anywhere

near full capacity and additional development is required before it reaches a first threshold to meet its

current mandate and obligations. It is anticipated that this threshold will have been reached in about

3 years. There have been countless challenges and tasks over the period, but the Centre and its staff

can look back on its several achievements with pride.

The Centre has defined the following objectives over the next three year cycle to be priorities if it

wishes to reach this first threshold level.

Information from the Centre (to be used for the identification of the proceeds of crime in money

laundering or for financing of terrorism) should become recognised and used by investigating

agencies and law enforcement authorities as relevant and of high quality; Stakeholders should have an increased understanding of the Centre and its mandate, functions

and responsibilities and thus be in a better position to fully utilise its products; Accountable institutions and indeed, the public more generally, should have an Increased

awareness of AML/ CFT vulnerabilities and threats, which will create a better platform for

increased preventive action; All vulnerable institutions (businesses) should be encouraged to grow a culture of compliance,

which is properly supervised (by supervisory bodies) and implemented in accordance with the

amended FIC Act; Combating of ML/ FT relies on the legal framework which should be robust, relevant and adequate,

and aligned with global standards through intensive interaction with the relevant international

bodies, including the FATF, ESAAMLG, Egmont Group and the United Nations; and Ensuring that the Centre becomes a sustainable and a capable institution to give effect to the

mandate and objectives placed before the Centre.

These strategic areas are described and targets are set for the three year period of this strategic plan.

These strategic targets identify significant and strategic issues to be addressed by the Centre only.

Ongoing business is assumed to be implemented according to fully developed operational plans and

performance agreements.


Over the next three years, the Centre’s staff shall need to build their work programmes around

the objectives set out above. Firstly, the Centre will continue to strive to provide to stakeholders,

both domestic law enforcement, as well as international financial intelligence units, information of

the utmost integrity and of the highest quality, thus enabling immediate, thorough and successful

investigations. Accuracy and speed will need to be twinned and neither should be achieved at the

expense of the other. Performance targets should be met despite increases in the scope and scale of

the information being received.

Second, this also means that the Centre should provide active analytic and other support to

investigations and projects to enable successes, which means that the Centre’s analytic capability

should be located close to investigations and should provide active backup to these. The Financial

Intelligence Centre will track investigations in order to measure and quantify its impact. Further

assistance over and beyond the initial referral or response will be required to ensure that investigations

lead to prosecutions and prosecutions turn into convictions. Critical to the success of this focus is that

the various stakeholders have an increased understanding of the Centre and its mandate, functions

and responsibilities and can better utilise its products.

The Centre will, thirdly, seek to promote full compliance by accountable and reporting institutions and

individuals whereby they effectively implement control measures and effective compliance approaches

to minimise, if not eliminate money laundering and terrorist financing through their institutions and

employees on a voluntary basis. The development of such a compliance culture is also dependent

on stakeholders, including the public at large, understanding the various threats and being aware of

what factors can lead to money laundering and financing of terrorism. Thus a focus on awareness

generation is important if the Centre wishes to create circumstances for the prevention and reduction

of laundering or terror financing.

Fourthly, the Centre should also play its role as the institution primarily responsible for developing a

coordinated and integrated approach to the development of a comprehensive anti-money laundering

and terrorist financing environment. This environment will require the full participation of the various

stakeholders within government, enabling each of these to contribute their skills and facilities to a

common objective.

Fifth, a strong relevant and robust legal framework is critical for AML/ CFT successes. This needs to

be aligned to the global standards while taking into account the constantly evolving situation. This

requires close interaction and engagement with the relevant international bodies, particularly the

FATF, but including the ESAAMLG, the Egmont Group and the United Nations amongst others. It also

means close interaction with al relevant domestic AML/ CFT stakeholders.

Sixth, while the Centre has done well in a short time, it remains vulnerable in certain areas and remains

overly dependent on the core establishment associated with its growth. Systems, especially IT, but

including all other business processes, with the necessary skills need to be strengthened, procedures


and processes refined and a performance culture must be entrenched. Critical to this is the extraction

and integration of the expertise and knowledge of founding and core staff in transforming the Centre

into a learning organisation that seeks to integrate the knowledge of its entire staff as a platform for

future direction and activities. These factors are all heavily dependent on adequate funding and

budgetary resources.

Finally, as a result of the successes achieved in the dynamic and integrated pursuit of its AML/

CFT objectives, South Africa will gain an enhanced reputation in the field of AML/ CFT standards

implementation. South Africa will be able to enjoy outcomes which improve the perceptions of the

country’s financial stability and as a destination for foreign investment. At the same time this will be an

indication of a significant reduction in money laundering and terror financing, this crime in general.

Back in June 2004 the Honourable Mr Trevor A Manuel, MP, Minister of Finance told Parliament that

“...The Financial Intelligence Centre Act was passed by Parliament in November 2001 to provide us

with another weapon to fight crime… The Act intends to minimise the chances of money resulting

from criminal activities being introduced into the financial system – for example, into banks and

insurance companies, or being used to buy property. Money launderers view the financial system as

a device to transfer the proceeds of their crime and to legitimise their activities. When they involve

the financial system in money laundering schemes, they necessarily involve the institutions that

provide access to the system. This can lead to the involvement of financial institutions in criminal

activity, even if unknowingly. It can result in the erosion of public confidence of our financial

institutions and undermine the stability of the system. If financial institutions are indifferent to this,

it may cause them to suffer losses through fraud and the effects of being associated with criminals.

None of us – not the banks, not ordinary citizens – want this to happen.”

The Centre is well on the way into being developed as a strong and sustainable institution enabled to

fully give effect to the legislative mandate and responsibilities placed on it and its staff by the Minister

of Finance.

Performance Report

annual report

2008fic

41

Performance Report42

Key

Per

form

ance

Are

asK

ey P

erfo

rman

ce I

ndic

ator

sTa

rget

Ach

ieve

men

t

1st O

bjec

tive:

In

form

atio

n fr

om t

he C

entr

e (p

roce

eds

of c

rim

e / M

L &

TF)

is r

ecog

nise

d by

the

Cen

tre

Law

Enf

orce

men

t as

rel

evan

t an

d of

hig

h qu

ality

Effe

ctiv

ely

man

age

dom

estic

an

d in

tern

atio

nal e

xcha

nge

of

info

rmat

ion

– In

telli

genc

e

Num

ber

of c

ritic

al d

atab

ases

en

ablin

g ac

cess

to

info

rmat

ion

- In

crea

se a

cces

s x

3 n

ew

data

base

s

Incr

ease

acc

ess

with

3

addi

tiona

l dat

abas

esA

sses

smen

t of

the

fun

ctio

nalit

y of

an

inte

rnat

iona

l da

taba

se F

activ

a co

mpl

eted

and

dra

ft c

ontr

act

obta

ined

.

Dis

cuss

ion

conc

erni

ng C

IPR

O a

nd E

-NAT

IS d

atab

ases

he

ld.

Effe

ctiv

ely

man

age

dom

estic

an

d in

tern

atio

nal e

xcha

nge

of

info

rmat

ion

– All

othe

r

Ref

erra

ls t

o La

w E

nfor

cem

ent

Aut

horit

ies

(LEA

s)999 r

efer

rals

wer

e di

ssem

inat

ed w

ith a

n ap

prox

imat

e va

lue

of R

2 B

illio

n.

Feed

back

req

uest

s to

Law

En

forc

emen

t A

genc

ies’

and

oth

er

stak

ehol

ders

Bi-a

nnua

l fee

dbac

k by

end

Q

2 a

nd e

nd Q

4406 R

eque

sts

wer

e re

ceiv

ed:

- 3

27

nat

iona

l-

79

inte

rnat

iona

l

Con

clud

e va

rious

Mem

oran

dum

Of

Und

erst

andi

ng (

MO

U)

with

bot

h in

tern

al a

nd e

xter

nal s

take

hold

ers

Mai

ntai

n op

erat

iona

l MO

U’s

an

d A

dd 3

cou

ntry

pro

files

Com

plet

e id

entif

icat

ion

proc

ess

of A

fric

an F

IU’s

for

assi

stan

ce a

nd M

OU

’s b

y en

d Q

3

2 M

OU

s w

ere

conc

ludi

ng d

urin

g th

e pa

st fin

anci

al y

ear

with

UK

and

Rus

sia.

Dra

fted

MO

Us

for

conc

lusi

on w

ith:

Aru

ba,

Bah

amas

, B

oliv

ia,

Fran

ce,

Geo

rgia

, G

erm

any,

Gib

ralta

r, G

reec

e,

Gua

tem

ala,

Hon

g K

ong,

Ind

ia,

Ital

y, J

apan

, M

alay

sia,

M

auritiu

s, M

exic

o, N

ethe

rlan

ds,

Ant

illes

, Pa

ragu

ay,

Port

ugal

, Po

land

, Q

atar

, Sa

n M

arin

o, S

inga

pore

, So

uth

Kor

ea,

Spai

n, S

witz

erla

nd,

Taiw

an,

Turk

ey,

Thai

land

an

d U

nite

d A

rab

Em

irat

es.

Con

clud

ed d

raft

of M

OU

with

Nig

eria

.

Iden

tifie

d th

e ne

ed t

o co

nclu

de a

MO

U w

ith

Moz

ambi

que

and

Nam

ibia

.

Hos

ted

Nam

ibia

n FI

U a

naly

st.

Impa

rted

kno

wle

dge

conc

erni

ng,

requ

ests

, r

efer

rals

and

bus

ines

s pr

oces

ses.

Hos

ted

Tanz

ania

n FI

U.

Tim

eous

ly c

aptu

re,

anal

yse

and

refe

r re

port

s ag

ains

t cl

ear

busi

ness

pr

oces

ses

Rev

iew

ing

and

map

ping

of

proc

esse

s fo

r re

ceip

t of

CTR

, EF

T an

d C

CR

rep

orts

Dev

elop

men

t of

new

re

port

ing

stre

ams

Dev

elop

ing

stre

ams

unde

rway

for

CTR

and

CC

R.

2nd

Obj

ectiv

e: St

akeh

olde

rs (

inte

rgov

ernm

enta

l & la

w e

nfor

cem

ent

auth

oriti

es)

have

an

incr

ease

d un

ders

tand

ing

of t

he C

entr

e m

anda

te,

func

tions

and

re

spon

sibi

litie

s

Part

icip

ate

in in

tern

atio

nal b

odie

s an

d fo

r a

to e

ngag

e w

ith p

olic

y an

d im

plem

enta

tion

prac

tices

Impr

ove

inte

rnat

iona

l coo

rdin

atio

nA

tten

d 3

FAT

F pl

enar

y m

eetin

gsM

embe

rs o

f th

e C

entr

e at

tend

3 F

ATF

plen

ary

mee

tings

:-

June

20

07

- O

ctob

er 2

00

7 a

nd-

Febr

uary

20

08


Key

Per

form

ance

Are

asK

ey P

erfo

rman

ce I

ndic

ator

sTa

rget

Ach

ieve

men

t

Reg

ular

ly a

tten

d m

eetin

gs o

f the

Fi

nanc

ial A

ctio

n ta

sk F

orce

(FA

TF),

th

e Ea

ster

n an

d So

uthe

rn A

fric

a A

nti M

oney

Lau

nder

ing

Gro

up

(ESA

AM

LG)

and

the

Egm

ont

Gro

up

of F

inan

cial

Inte

llige

nce

Uni

ts

Und

erta

ke 1

Mut

ual

Eval

uatio

n pe

r an

num

An

inte

r-se

ssio

nal m

eetin

g of

the

FAT

F W

orki

ng G

roup

on

Mon

ey L

aund

erin

g an

d Te

rror

Fin

anci

ng w

as

atte

nded

dur

ing

May

20

07

.

An

inpu

t w

as p

repa

red

for

the

FATF

Wor

king

Gro

up o

n Te

rror

ist

Fina

ncin

g an

d M

oney

Lau

nder

ing

on S

peci

al

Rec

omm

enda

tion

III.

Mem

bers

of th

e C

entr

e at

tend

ed a

con

fere

nce

on R

isk

Bas

ed A

ppro

ach

to A

ML/

CFT

.

A m

eetin

g w

as a

tten

ded

on 3

0 J

anua

ry 2

00

8 w

here

th

e Po

lish

Em

bass

y w

as lo

bbyi

ng for

sup

port

for

Pol

and

to b

ecom

e a

mem

ber

of F

ATF.

Pre

para

tions

for

the

FAT

F m

eetin

g in

Feb

ruar

y an

d al

loca

tion

of r

espo

nsib

ilitie

s fo

r th

e va

riou

s di

scus

sion

s w

ere

done

in J

anua

ry 2

00

8.

Faci

litat

ing

of c

olla

ting

in r

espe

ct in

res

pect

of Tr

ade

Bas

ed M

oney

Lau

nder

ing

in p

repa

ratio

n of

the

Jun

e 2008 P

lena

ry m

eetin

g.

Mem

bers

of th

e C

entr

e pa

rtic

ipat

ed in

the

FAT

F M

utua

l Eva

luat

ion

of C

anad

a as

wel

l as

a fo

llow

up

mee

ting

to

the

eval

uatio

n of

the

UK

.

Part

icip

ated

in I

MF

asse

ssm

ent

of M

auritiu

s’ A

ML/

CFT

m

easu

res.

ESA

AM

LGA

tten

danc

e at

all

bi-a

nnua

l an

d tr

i-ann

ual E

SAA

MLG

m

eetin

gs a

nd t

echn

ical

as

sist

ance

pro

vide

d to

tw

o re

gion

al c

ount

ries

re A

ML/

CFT

fram

ewor

k

A m

embe

r of

the

Cen

tre

part

icip

ated

in a

n on

goin

g pr

oces

s to

impr

ove

the

effic

ienc

y of

the

ESA

AM

LG

Secr

etar

iat

and

assi

sted

with

the

com

pila

tion

of a

ty

polo

gy q

uest

ionn

aire

on

a ca

sh c

ourier

pro

ject

.

An

offic

ial f

rom

the

dep

artm

ent

was

sec

onde

d to

the

ESA

AM

LG S

ecre

tariat

.

Acc

ompa

nied

the

Dep

uty

Min

iste

r of

Fin

ance

to

the

7th

ESA

AM

LG C

ounc

il of

Min

iste

rs m

eetin

g in

Gab

oron

e,

Bot

swan

a.

Offic

ials

fro

m t

he d

epar

tmen

t pa

rtic

ipat

ed in

the

Mar

ch

2008 E

SAA

MLG

Tas

k Fo

rce

mee

tings

of Se

nior

Offic

ials

w

hich

wer

e he

ld in

Dar

-es-

Sala

am,

Tanz

ania

.

Tech

nica

l Ass

ista

nce

to M

ozam

biqu

e in

the

set

ting

up

of t

heir F

IU.

Tech

nica

l Ass

ista

nce:

A

pre

sent

atio

n w

as d

eliv

ered

on

“Fin

anci

al A

naly

sis

and

Dis

sem

inat

ion

of in

form

atio

n” for

a F

IU c

apac

ity

build

ing

wor

ksho

p w

hich

too

k pl

ace

in B

otsw

ana

in

Febr

uary

20

08

.


Key

Per

form

ance

Are

asK

ey P

erfo

rman

ce I

ndic

ator

sTa

rget

Ach

ieve

men

t

Con

duct

ed T

rain

ing

wor

ksho

ps a

nd h

oste

d vi

sits

with

M

ozam

biqu

e, L

esot

ho,

Mal

awi,

Tanz

ania

and

Nam

ibia

on

var

ious

mat

ters

.

A m

embe

r of

the

dep

artm

ent

pres

ente

d a

part

of th

e IM

F M

utua

l Eva

luat

ion

asse

ssm

ent

repo

rt o

f M

auritiu

s to

the

ESA

AM

LG P

lena

ry.

Con

duct

ed M

utua

l Eva

luat

ion

of S

eych

elle

s an

d pr

esen

ted

a pa

rt o

f th

e IM

G M

utua

l Eva

luat

ion

asse

ssm

ent

repo

rt o

f M

auritiu

s to

the

ESA

AM

LG

Ple

nary

.

EGM

ON

TA

tten

d tr

i-ann

ual E

gmon

t m

eetin

gs a

nd p

rovi

sion

of

tech

nica

l ass

ista

nce

and

trai

ning

for

two

Afr

ican

FIU

’s

Att

ende

d tw

o pl

enar

y m

eetin

gs o

f Egm

ont

in S

antia

go

and

Kie

v.

Prov

ide

advi

ce t

o M

inis

ter

of

Fina

nce,

Cab

inet

and

gov

ernm

ent

stak

ehol

ders

Com

men

t an

d pr

ovid

e ad

vice

to

the

Min

iste

r on

all

mat

ters

af

fect

ing

AM

L/ C

FT p

olic

y an

d im

plem

enta

tion

ther

eof,

incl

udin

g do

cum

ents

, re

port

s, d

raft

le

gisl

atio

n, c

abin

et m

emor

anda

, et

c

Ong

oing

sat

isfa

ctio

n of

M

inis

ter

rega

rdin

g ad

vice

and

su

ppor

t in

clud

ing

docu

men

ts,

repo

rts,

cab

inet

mem

oran

da,

draf

t le

gisl

atio

n et

c.

Pro

vide

d br

iefin

g no

tes

to t

he M

inis

ter

during

the

2007/ 2

00

8 fin

anci

al y

ear.

Pro

vide

d ad

vice

to

Nat

iona

l Tre

asur

y on

:-

Poss

ible

par

tner

ship

bet

wee

n So

uth

Afr

ican

Ban

k of

Ath

ens

and

Wes

tern

Uni

on;

- C

ompl

ianc

e an

d ab

uses

of ba

nks

conc

erni

ng t

he

Mza

nsi a

ccou

nts.

The

Cen

tre

prov

ided

inpu

ts for

the

AM

L/ C

FT s

ectio

n of

So

uth

Afr

ica’

s re

spon

se t

o a

ques

tionn

aire

con

cern

ing

the

UN

Con

vent

ion

Aga

inst

Cor

rupt

ion.

Inpu

t ha

s al

so b

een

prov

ided

for

the

AM

L/ C

FT s

ectio

n of

a c

ount

ry q

uest

ionn

aire

con

cern

ing

the

OEC

D

Con

vent

ion

on B

ribe

ry.

Subm

issi

on t

o th

e Po

rtfo

lio C

omm

ittee

on

Trad

e an

d D

epar

tmen

t of

Tra

de a

nd I

ndus

try

to e

ffec

t ce

rtai

n ch

ange

s to

the

Nat

iona

l Gam

blin

g B

ill.

The

Cen

tre

atte

nded

the

NC

OP

Fin

al M

anda

te M

eetin

g on

the

Nat

iona

l Gam

blin

g A

men

dmen

t B

ill.

3rd O

bjec

tive:

Th

ere

is a

n in

crea

sed

awar

enes

s of

AM

L/ C

FT v

ulne

rabi

litie

s an

d th

reat

s an

d ne

ed for

pre

vent

ion,

in s

take

hold

ers

and

the

publ

ic

Mon

itor

com

plia

nce

perf

orm

ance

of

rep

ortin

g in

stitu

tions

, su

perv

isor

y bo

dies

and

oth

er

bodi

es (

Mon

itorin

g, P

reve

ntin

g,

Enfo

rcem

ent)

Liai

se w

ith S

uper

viso

ry b

odie

s, a

nd

acco

unta

ble

inst

itutio

ns

Add

ition

al M

OU

s w

ith S

uper

viso

ry

bodi

es

Num

ber

of o

n-si

te v

isits

, co

mpl

ianc

e re

view

s an

d jo

int

insp

ectio

ns

Publ

icat

ion

of G

uida

nce

Not

es

Ann

ual R

evie

w o

f Ins

pect

ion

Man

ual a

nd fr

amew

ork

with

ne

w a

dditi

ons

15

on-

site

vis

its/ c

ompl

ianc

e re

view

s8

join

t in

spec

tions

Kru

ger

Ran

ds, M

V de

aler

s,

esta

te a

gent

s, c

asin

os,

book

mak

er

MO

U s

igne

d w

ith E

AA

B,

CIP

RO

and

IR

BA

.

15 o

n-si

te v

isits

/ com

plia

nce

revi

ews.

8 jo

int

insp

ectio

ns.


Key

Per

form

ance

Are

asK

ey P

erfo

rman

ce I

ndic

ator

sTa

rget

Ach

ieve

men

t

Prev

entin

g (C

ompl

ianc

e Aud

its

incl

udin

g jo

int

insp

ectio

ns)

Con

duct

join

t in

spec

tions

with

N

GB

, EA

AB

, SA

RB

Exc

hang

e C

ontr

ol

15

on-

site

vis

its/c

ompl

ianc

e re

view

s

8 jo

int

insp

ectio

ns

24 C

asin

o on

site

vis

its.

42 B

ookm

aker

s on

site

vis

its.

13 I

nspe

ctio

ns w

ith E

AA

B t

o da

te.

25 I

nspe

ctio

ns w

ith S

AR

B E

XCO

N.

28 P

ost

Ban

k in

spec

tions

.

Faci

litat

e A

udit

of fi

nanc

ial

inte

rmed

iarie

s &

ass

et m

anag

ers

join

tly w

ith F

SB

At

leas

t 3

0 t

arge

ted

audi

ts b

y Fe

b 2

00

8In

spec

tions

of:

- 4

7 I

nsur

ance

com

pani

es;

- 2

6 I

nspe

ctio

ns o

f fin

anci

al s

ervi

ce p

rovi

ders

;-

1 a

sset

man

ager

; an

d-

24

CIS

man

ager

s on

site

vis

its.

Faci

litat

e co

mpl

ianc

e en

gage

men

ts

of t

rade

rs o

n ex

chan

ges

join

tly

with

JSE

On

site

vis

its o

f JSE

& B

ESA

tr

ader

s by

Mar

ch 2

00

86 O

n-si

te v

isits

of JS

E m

embe

rs.

Esta

blis

h in

spec

tora

te in

CA

P &

fa

cilit

ate

esta

blis

hmen

t of

trib

unal

Cap

acita

te in

spec

tora

te b

y en

d M

arch

20

08

Insp

ecto

rate

Doc

umen

t ha

s be

en d

raft

ed.

Prov

idin

g gu

idan

ce t

o re

gula

ted

entit

ies

Fina

lise

the

Follo

win

g G

uida

nce

Not

es:

- ST

R-

TFR

- P

EP’s

Fina

lise

of is

suan

ce b

y en

d D

ecem

ber

20

07

STR

gui

danc

e no

te fin

alis

ed a

nd g

azet

ted

on 1

4

Mar

ch 2

00

8.

TFR

and

PEP

Gui

danc

e no

tes

still

und

er c

onsi

dera

tion

by L

egal

and

Pol

icy.

Prep

are

Gui

danc

e no

tes:

- C

asin

o In

dust

ry-

Esta

te A

gent

s-

KYC

for

non-

bank

ing

finan

cial

in

stitu

tions

Fina

lise

for

issu

ance

by

end

Mar

ch 2

00

8D

raft

Gui

danc

e no

tes

still

und

er r

evie

w b

y Le

gal a

nd

Polic

y.

Dev

elop

and

impl

emen

t R

isk-

base

d fram

ewor

kR

epor

t on

a fr

amew

ork

to

impl

emen

t a

risk

sens

itive

ap

proa

ch t

o A

ML/

CFT

com

plia

nce

in t

he d

omes

tic e

nviro

nmen

t

Dev

elop

Ris

k se

nsiti

ve

impl

emen

tatio

n pl

an

Inco

rpor

ate

esse

ntia

l ele

men

ts

into

FIC

A.

Dev

elop

dra

ft r

isk

sens

itive

impl

emen

tatio

n pl

an

inco

rpor

atin

g es

sent

ial e

lem

ents

into

am

ende

d FI

CA

.

Exte

rnal

rem

edia

l tra

inin

g in

itiat

ives

Con

duct

com

plia

nce

rem

edia

l tr

aini

ng

36

reg

iona

l eng

agem

ents

for

targ

eted

ent

ities

by

Febr

uary

2

00

8

Trai

ned

45

boo

kmak

ers,

Mpu

mal

anga

,Tr

aine

d 3

8 b

ookm

aker

s, F

ree

Stat

e,Tr

aine

d 2

5 b

ookm

aker

s an

d To

talis

ator

s in

Mm

bath

o,P

rese

ntat

ion

at 1

0 E

AA

B r

egio

nal I

mbi

zo’s

,1 T

rain

ing

of F

SB C

IS D

epar

tmen

t,1 T

rain

ing

of E

RL

Gro

up o

f es

tate

age

nts,

1 t

rain

ing

of K

imbe

rley

att

orne

ys,

1 p

rese

ntat

ion

at t

he M

ortg

age

Con

fere

nce,

3 C

ISA

pre

sent

atio

ns t

o da

te,

Pre

sent

atio

ns t

o JS

E,

NA

REA

, A

CI

and

Alb

arak

a B

ank

in D

urba

n.


Key

Per

form

ance

Are

asK

ey P

erfo

rman

ce I

ndic

ator

sTa

rget

Ach

ieve

men

t

4th O

bjec

tive:

Sp

ecia

l Pro

ject

s

Iden

tific

atio

n of

ban

king

cus

tom

ers

– KY

C Im

age

bank

Nat

iona

l KYC

dat

aban

k fo

r Id

entif

icat

ion

of b

ank

cust

omer

sD

evel

op c

once

pt d

ocum

ent,

pr

ojec

t pl

ans

and

impl

emen

t by

Mar

ch 2

00

8

Con

cept

rep

ort

com

plet

e.

Dev

elop

and

impl

emen

t C

omm

unic

atio

n an

d M

arke

ting

stra

tegy

Dev

elop

Com

mun

icat

ion

and

Mar

ketin

g pl

an, in

clud

ing

publ

ic

awar

enes

s of

AM

L/ C

FT t

hrea

ts

Con

solid

ate

Com

mun

icat

ion

stra

tegy

Mon

thly

med

ia in

terv

entio

ns

Reg

ular

inte

rnat

iona

l co

mm

unic

atio

n in

terv

entio

ns

Con

solid

ate

Com

mun

icat

ion

stra

tegy

.

Mon

thly

med

ia in

terv

entio

ns.

Reg

ular

inte

rnat

iona

l com

mun

icat

ion

inte

rven

tions

.

C&

M s

trat

egy

and

impl

emen

tatio

n pl

an c

ompl

eted

.

Impl

emen

t C

& M

str

ateg

yO

ngoi

ng li

aiso

n w

ith N

T an

d SA

RS

on im

plem

enta

tion

stra

tegy

.

Con

duct

pub

lic a

war

enes

s ca

mpa

ign

aim

ed a

t pr

even

ting

AM

L/ C

FT

12

Med

ia p

ublic

atio

ns a

nd

unde

rtak

e on

e na

tionw

ide

cam

paig

n

Inte

ract

ion

with

the

Pos

t O

ffic

e on

the

dis

trib

utio

n is

sues

.

Med

ia p

lace

d on

hol

d.

Adm

inis

ter

publ

ic q

uery

aw

aren

ess

thro

ugh

Feed

back

pr

oces

s

Wel

l res

ourc

ed w

ith

docu

men

ted

timeo

us

resp

onse

s

Res

pons

es t

o 5

4 q

ueries

as

rece

ived

dur

ing

the

last

qu

arte

r of

the

20

07

/ 20

08

fin

anci

al y

ear.

5th O

bjec

tive:

In

stitu

tions

tha

t m

ay b

e vu

lner

able

to

be e

xplo

ited

by c

rim

inal

or

terr

or n

etw

orks

hav

e a

cultu

re o

f co

mpl

ianc

e

Impl

emen

t al

l fin

anci

al in

stitu

tions

re

port

ing

requ

irem

ents

and

ens

ure

bett

er s

trat

egic

coo

rdin

atio

n an

d tr

aini

ng o

f sta

keho

lder

s

Impl

emen

tatio

n of

all

repo

rtin

g ob

ligat

ions

Tran

slat

e re

port

ing

oblig

atio

ns

into

:•

IT r

equi

rem

ents

;•

Lega

l am

endm

ents

• C

apac

ity b

uild

ing/

staf

fing

• Li

aiso

n w

ith s

take

hold

ers

The

Cen

tre

has

deci

ded

to p

rior

itise

:1.

Cas

h th

resh

old

repo

rtin

g in

: C

ar d

eale

r an

d C

asin

os;

and

2.

Cas

h C

ourier

rep

ortin

g at

nat

iona

l key

poi

nts

for

impl

emen

tatio

n.

Prov

isio

n of

ext

erna

l tra

inin

g5

FI c

ours

es

25

com

plia

nce

trai

ning

w

orks

hops

5 F

I co

urse

s.

25 c

ompl

ianc

e tr

aini

ng w

orks

hops

.

6th O

bjec

tive:

The

com

batin

g of

AM

L/ C

FT r

elie

s on

the

Leg

al fra

mew

ork

(whi

ch is

rob

ust,

rel

evan

t an

d ad

equa

te)

Und

erta

ke le

gisl

ativ

e am

endm

ents

of

FIC

AA

men

ded

Act

bas

ed o

n A

dmin

istr

ativ

e En

forc

emen

tC

abin

et R

evie

wPa

rliam

ent

Enac

tmen

t

Bill

sub

mitt

ed t

o C

abin

et in

Mar

ch 2

00

8 a

nd a

ppro

ved

for

Tabl

ing

in P

arlia

men

t.

Am

ende

d A

ct b

ased

on

legi

slat

ive

revi

ew (

follo

win

g 3

ye

ars

impl

emen

tatio

n an

d ne

w

inte

rnat

iona

l sta

ndar

ds)

End

Q3

Firs

t dr

aft

of c

onsu

ltatio

n do

cum

ent

on c

usto

mer

due

di

ligen

ce d

evel

oped

and

in p

roce

ss o

f be

ing

refin

ed.

A p

roce

ss o

f co

mpa

rativ

e re

sear

ch o

n cu

stom

er d

ue

dilig

ence

mea

sure

s fr

om a

n in

tern

atio

nal p

ersp

ectiv

e is

und

erw

ay.


Key

Per

form

ance

Are

asK

ey P

erfo

rman

ce I

ndic

ator

sTa

rget

Ach

ieve

men

t

Am

ende

d A

ct w

ith u

pdat

ed

sche

dule

sIm

plem

ent

new

pro

visi

ons

A d

raft

of th

e pr

opos

ed a

men

dmen

ts t

o th

e Sc

hedu

les

to t

he F

IC A

ct w

as p

repa

red

for

inte

rnal

and

ext

erna

l co

nsul

tatio

n.

Con

sulta

tions

in r

espe

ct o

f th

e am

endm

ent

of t

he

Sche

dule

s w

ere

held

with

six

Pro

vinc

ial L

icen

sing

A

utho

ritie

s:•

Free

Sta

te G

ambl

ing

Boa

rd;

• W

este

rn C

ape

Gam

blin

g an

d R

acin

g B

oard

;•

Mpu

mal

anga

Gam

blin

g B

oard

;•

Nor

th W

est

Gam

blin

g B

oard

;•

Kw

a-zu

lu N

atal

Gam

blin

g B

oard

; an

d•

Lim

popo

Gam

blin

g B

oard

.

Dis

cuss

ions

wer

e he

ld w

ith t

he S

outh

Afr

ican

Res

erve

B

ank

on t

he w

ay for

war

d in

res

pect

of am

endi

ng t

he

refe

renc

e to

the

SA

RB

in S

ched

ule

2 o

f th

e A

ct.

Mee

tings

wer

e al

so h

eld

betw

een

the

Cen

tre

and

the

follo

win

g st

akeh

olde

rs in

res

pect

of th

e pr

oces

s to

am

end

the

Sche

dule

s:•

Land

Ban

k;•

IRB

A;

and

DTI

(in

res

pect

of th

e EA

AB

’s r

ole

as a

sup

ervi

sory

bo

dy).

Inte

rpre

tatio

n of

Cor

e le

gisl

atio

nTh

e C

entr

e pr

ovid

ed a

dvic

e to

the

Ass

ocia

tion

of

Col

lect

ive

Inve

stm

ent

Sche

mes

con

cern

ing

the

deve

lopm

ent

of a

bas

ic in

vest

men

t pr

oduc

t to

com

ply

with

the

exe

mpt

ions

und

er t

he F

IC A

ct.

Res

pond

ed t

o va

riet

y le

gal q

ueries

.

Und

erta

ke s

trat

egic

res

earc

h an

d ty

polo

gies

in o

rder

to

impa

ct o

n po

licy

deve

lopm

ent

Dev

elop

men

t of

crit

eria

to

enab

le

furt

her

com

mis

sion

ing

of r

esea

rch

for

polic

y ob

ject

ives

and

pro

vide

ty

polo

gies

inpu

ts

Ann

ual r

evie

w o

f re

sear

ch a

reas

.

7th O

bjec

tive:

Th

e C

entr

e m

eets

and

live

s up

to

inte

rnat

iona

l obl

igat

ions

, co

mm

itmen

ts,

requ

ired

of th

e C

entr

e &

RSA

and

SA

is a

res

pect

ed m

embe

r of

the

Int

erna

tiona

l AM

L/

CFT

com

mun

ity

Prep

are

for

Mut

ual E

valu

atio

nR

ecei

ve M

utua

l Eva

luat

ion

Que

stio

nnai

res

from

all

stak

ehol

ders

Q4

Mut

ual E

valu

atio

n qu

estio

nnai

res

have

bee

n co

mpl

eted

and

mee

tings

on

the

basi

s of

the

var

ious

in

puts

rec

eive

d.

A C

ab M

emo

on t

he in

itial

inpu

ts fro

m s

take

hold

ers

and

findi

ngs

was

pre

pare

d an

d su

bmitt

ed t

o C

abin

et.

Com

plet

ion

of s

take

hold

er a

ctiv

ities

Func

tioni

ng s

teer

ing

com

mitt

ee.

Dev

elop

res

pons

es t

o ga

p an

alys

is r

esul

ts.

Com

plet

ion

of p

lann

ing

activ

ities

Con

duct

sel

f as

sess

men

t.


Key

Per

form

ance

Are

asK

ey P

erfo

rman

ce I

ndic

ator

sTa

rget

Ach

ieve

men

t

Impr

oved

str

ateg

ic c

oord

inat

ion

and

trai

ning

of p

ublic

par

tner

sH

ost

wor

ksho

ps a

nd fee

dbac

k se

ssio

ns for

st

akeh

olde

rs.

8th O

bjec

tive:

The

Cen

tre

is a

sus

tain

able

and

cap

able

inst

itutio

n

Prov

ide

optim

um p

hysi

cal

envi

ronm

ent

for

succ

ess

Fina

lise

the

iden

tifie

d pe

rman

ent

offic

e pr

emis

esQ

2Si

gned

a fiv

e ye

ar le

ase

cont

ract

for

add

ition

al flo

or

spac

e at

Cen

turion

offic

es.

Dev

elop

mov

e pl

anne

r fo

r id

entif

ied

perm

anen

t of

fice

prem

ises

Q4

Offic

e flo

or la

yout

has

bee

n fin

alis

ed.

Mov

e th

e C

entr

e in

to n

ew

prem

ises

20

09

/20

10

Sche

dule

d fo

r A

ugus

t 2

00

8.

Ensu

re e

ffect

ive

offic

e re

loca

tion

of t

he M

&A

and

ICT

Dep

artm

ents

to

the

tem

pora

ry o

ffice

in

Cen

turio

n

Q4

M&

A a

nd I

CT

relo

cate

d to

Cen

turion

offic

es w

ith a

ll th

e fa

cilit

ies

and

man

agem

ent

ther

eof su

cces

sful

ly.

Dev

elop

and

impl

emen

t dy

nam

ic

and

cust

omis

ed H

elpd

esk

Syst

em

in c

olla

bora

tion

with

the

ICT

Dep

artm

ent

Q4

Tem

pora

ry s

yste

m in

pla

ce.

Esta

blis

h a

relia

ble,

cos

t ef

fect

ive

and

cred

ible

sup

plie

r ba

seO

ngoi

ngC

ompl

eted

eva

luat

ion

of P

PL

for

norm

al c

omm

oditi

es,

HR

and

IC

T fo

r 2

00

8/ 2

00

9.

Dev

elop

Fac

ilitie

s M

anag

emen

t Po

licie

s an

d Pr

oced

ures

Q4

Dra

ft p

olic

ies

cove

ring

Sup

port

Ser

vice

s, O

pera

tions

M

aint

enan

ce,

Occ

upat

iona

l Hea

lth,

Safe

ty a

nd

Secu

rity

, Ve

hicl

e U

se,

Park

ing,

aw

aitin

g ap

prov

al.

Boo

klet

on

Pro

cedu

res

dist

ribu

ted

to s

taff a

t C

entu

rion

.

Ensu

re p

rope

r pl

anni

ng t

o m

atch

C

ontr

act

Man

agem

ent

Stra

tegy

Q4

App

oint

ed a

con

sulta

nt t

o ac

t as

Sup

ply

Cha

in

Man

ager

.

Ensu

re s

ecur

e an

d ef

fect

ive

ITD

evel

op a

nd im

plem

ent

the

Cen

tre’

s IT

sys

tem

s

Fina

lise

desi

gn s

peci

ficat

ions

for

the

Cen

tre’

s IT

sys

tem

s

Ong

oing

end

ing

Q4

of

20

08

/20

09

Tend

ers

awar

ded

for

FIC

CIT

S pr

ojec

t.Le

ss t

han

5%

dow

ntim

e of

inte

rnal

sys

tem

s.

Impl

emen

tatio

n ro

adm

ap d

epen

denc

ies

desc

ript

ion

and

proc

urem

ent

plan

com

plet

ed.

Infr

astr

uctu

re a

nd A

pplic

atio

ns A

rchi

tect

ure

desi

gn

90%

com

plet

e.

Arc

hite

ctur

e de

sign

val

idat

ed a

nd d

etai

led

valid

atio

n on

goin

g w

ith im

plem

enta

tion.

Part

ial i

mpl

emen

tatio

n of

new

sy

stem

sO

ngoi

ng e

ndin

g Q

4 o

f 2

00

8/2

00

9M

anag

emen

t In

form

atio

n Sy

stem

(M

IS)

benc

hmar

k co

mpl

eted

. A

ll be

nchm

arks

co

mpl

eted

and

ben

chm

ark

repo

rts

com

plet

ed.


Key

Per

form

ance

Are

asK

ey P

erfo

rman

ce I

ndic

ator

sTa

rget

Ach

ieve

men

t

Infr

astr

uctu

re im

plem

enta

tion

com

plet

ed in

the

new

C

entu

rion

loca

tion

in p

repa

ratio

n fo

r th

e bu

ild a

nd

impl

emen

tatio

n of

FIC

CIT

S.

Mai

ntai

n an

d im

prov

e ex

istin

g sy

stem

sO

ngoi

ngR

educ

ed a

nd m

aint

aine

d tu

rnar

ound

tim

e to

less

tha

n 24 h

ours

res

olut

ion

afte

r lo

ggin

g of

a q

uery

on

all

criti

cal b

usin

ess

syst

ems.

Rou

tine

mai

nten

ance

on

all s

yste

ms

carr

ied

out

as

plan

ned

with

99

% u

ptim

e.

Upg

rade

d th

e fo

llow

ing

appl

icat

ions

:- iB

ase

from

v3

to

v4

and

Ana

lyst

Not

eboo

k v6

to

v8.

Rep

lace

d al

l old

PC

and

scr

een

hard

war

e eq

uipm

ent

with

incr

ease

d m

emor

y of

1 G

B o

f R

AM

and

2.1

3G

Hz

and

with

fla

t sc

reen

s.

Ensu

re E

ffect

ive

Cap

acity

Bui

ld in

tern

al c

apac

ity a

nd r

ecru

it st

aff

Impl

emen

t th

e ap

prov

ed

recr

uitm

ent

stra

tegy

– o

ngoi

ng

Impl

emen

t th

e ap

prov

ed

trai

ning

pla

n –

ongo

ing

App

oint

ed 6

1 e

mpl

oyee

s as

fol

low

s:•

IT –

17

;•

CA

P –

20

;•

Faci

litie

s M

anag

emen

t –

4;

• Fi

nanc

e an

d P

rocu

rem

ent

– 5

;•

L&P

– 5

;•

OFD

– 1

;•

HR

– 2

; an

d•

M&

A –

7.

14 R

esig

natio

ns in

the

pas

t fin

anci

al y

ear.

6 S

taff m

embe

rs w

ere

prom

oted

in t

he p

ast

finan

cial

ye

ar a

nd 2

wer

e tr

ansf

erre

d.

Rec

ruitm

ent

adve

rts

plac

ed:

• C

AP

– 1

9;

• Fi

nanc

e –

9;

• M

&A

– 2

0;

• IT

– 1

0;

• Fa

cilit

ies

Man

agem

ent

– 6

; an

d•

HR

– 1

.

Bur

sary

pol

icy

draf

ted,

ado

pted

and

effec

tive.

Bur

sary

app

licat

ions

con

side

red

and

22

bur

saries

gr

ante

d to

sta

ff m

embe

rs.

Bur

sary

gra

nted

to

22

sta

ff.


Key

Per

form

ance

Are

asK

ey P

erfo

rman

ce I

ndic

ator

sTa

rget

Ach

ieve

men

t

Ong

oing

dev

elop

men

t of

the

C

entr

e’s

Aca

dem

y

The

follo

win

g em

ploy

ees

atte

nded

diff

eren

t tr

aini

ng

cour

ses:

• C

AP

– 4

3;

• M

&A

– 6

9;

• O

ffic

e of

the

Direc

tor

– 1

4;

• Fi

nanc

e an

d P

rocu

rem

ent

– 2

6;

• H

R –

16

;•

IT –

18

;•

Faci

litie

s –

1;

and

• L&

P –

6.

The

Cen

tre

appo

inte

d tw

o in

tern

s.

Dev

elop

org

anis

atio

nal c

ultu

re a

nd

enha

nce

inte

rnal

com

mun

icat

ion

Impl

emen

t ch

ange

m

anag

emen

t an

d O

D p

roce

ss

Impl

emen

tatio

n of

the

Fra

ud

Prev

entio

n St

rate

gy:

• Fr

aud

Hot

line

• R

epor

ting

offic

er

Dev

elop

the

Cen

tre’

s C

ode

of

Con

duct

Tale

nt m

anag

emen

t su

rvey

con

duct

ed a

nd p

relim

inar

y re

sults

pre

sent

ed t

o M

anag

emen

t.

Hot

line

to b

e la

unch

ed 1

Apr

il 2

00

8.

Dra

ft C

ode

of C

ondu

ct p

repa

red,

aw

aitin

g fin

al

com

men

ts a

nd a

ppro

val.

Supp

ort

Del

iver

y of

Ser

vice

sEn

sure

nec

essa

ry p

olic

ies,

sy

stem

s an

d pr

oced

ures

are

ef

fect

ed fo

r m

anag

ing

budg

ets

and

expe

nditu

re o

f the

Cen

tre

Impl

emen

tatio

n of

en

hanc

emen

t in

Q2

Impl

emen

t th

e ap

prov

ed

Rem

uner

atio

n St

rate

gy•

Job

eval

uatio

n an

d gr

adin

g by

Q2

• B

ench

mar

king

of s

alar

ies

by Q

2

Rev

iew

and

upd

ate

of

the

exis

ting

polic

ies

and

proc

edur

es

An

enha

nced

quo

tatio

n sy

stem

has

gon

e liv

e,

addr

essi

ng:

• Sc

orin

g m

odul

e fo

r al

l pro

cure

men

t ab

ove

R3

0,0

00

.00

and

• A

ctiv

atio

n of

bud

get

com

mitm

ent

incl

udin

g so

ft

com

mitm

ent

i.e.

un

appr

oved

req

uisi

tions

.

Bud

get

com

mitm

ent

activ

ated

and

app

licab

le fro

m

Apr

il 2

00

8.

Subm

issi

on for

the

est

ablis

hmen

t of

the

Rem

uner

atio

n C

omm

ittee

dra

fted

for

Min

iste

r of

Fin

ance

’s a

ppro

val.

Intr

oduc

ed t

he fol

low

ing

new

pol

icie

s an

d pr

oced

ures

:•

Pro

cure

men

t Th

resh

olds

pra

ctic

e no

te;

• P

rocu

rem

ent

proc

edur

es r

elat

ed t

o ca

tering

pr

actic

e no

te;

• Lo

cal a

nd I

nter

natio

nal T

rave

l pro

cedu

res

prac

tice

note

; an

d•

Leav

e P

roce

dure

s pr

actic

e no

te.

Dev

elop

men

t of

the

fol

low

ing

new

pol

icie

s:•

Stud

y as

sist

ance

pol

icy;

and

• In

duct

ion

polic

y.

Dra

ft R

emun

erat

ion

Polic

y in

pla

ce.

Trai

ning

of th

e C

entr

e’s

staf

f m

embe

rs o

n SC

M

proc

edur

es.

Audit Committee Report

annual report

2008fic

51

Audit Committee Report52

AUDIT COMMITTEE REPORT

Report of the Audit Committee

We are pleased to present our report for the financial year ended 31 March 2008.

Audit Committee members and attendance

The Audit Committee consisted of the three non-executive members listed hereunder and held one

meeting for the financial year under review.

Name of Member Meetings attended

Mr C D Kneale 4 of 4

Mr B Lengange 4 of 4

Ms N Khumalo 4 of 4

Audit Committee responsibility

The Audit Committee reports that it has complied with its responsibilities arising from section 38(1)

(a) of the PFMA and Treasury Regulation 3.1.13. The Audit Committee has adopted an appropriate

formal Terms of Reference as its Audit Committee Charter, has regulated its affairs in compliance with

this Charter and has discharged all its responsibilities as contained therein.

The effectiveness of internal control

The Audit Committee confirms that, based on reports from the Auditor-General and the internal

Auditors, it believes that the internal controls of the Financial Intelligence Centre are effective.

Evaluation of Financial Statements

The Audit Committee has:

a) Reviewed and discussed the audited annual financial statements to be included in the annual

report with the Auditor-General and the Accounting Officer;

b) Reviewed the Auditor-General’s management letter and management’s response thereto; and

c) Reviewed accounting policies and practices.

CLIVE D KNEALE

Chairperson: Audit Committee, Financial Intelligence Centre

Date: 12 August 2008

Report of the Auditor-General

annual report

2008fic

53

Report of the Auditor-General54

REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ON THE FINANCIAL STATEMENTS AND PERFORMANCE INFORMATION OF THE FINANCIAL INTELLIGENCE CENTRE FOR THE

YEAR ENDED 31 MARCH 2008

REPORT ON THE FINANCIAL STATEMENTS

Introduction

1. I have audited the accompanying financial statements of the Financial Intelligence Centre

(FIC) which comprise the statement of financial position as at 31 March 2008, statement of

financial performance, statement of changes in net assets and cash flow statement for the year

then ended, and a summary of significant accounting policies and other explanatory notes,

and the directors’ report, as set out on pages 8 to 39 and 60 to 83.

Responsibility of the accounting authority for the financial statements

2. The accounting authority is responsible for the preparation and fair presentation of these

financial statements in accordance with the basis of accounting determined by the National

Treasury, as set out in the accounting policies (Basis of preparation) and in the manner required

by the Public Finance Management Act, 1999 (Act No. 1 of 1999) (PFMA).

3. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation

and fair presentation of financial statements that are free from material misstatement,

whether due to fraud or error selecting and applying appropriate accounting policies making accounting estimates that are reasonable in the circumstances.

Responsibility of the Auditor-General

4. As required by section 188 of the Constitution of the Republic of South Africa, 1996 read with

section 4 of the Public Audit Act, 2004 (Act No. 25 of 2004) (PAA), my responsibility is to

express an opinion on these financial statements based on my audit.

5. I conducted my audit in accordance with the International Standards on Auditing and General

Notice 616 of 2008, issued in Government Gazette No. 31057 of 15 May 2008. Those

standards require that I comply with ethical requirements and plan and perform the audit

to obtain reasonable assurance on whether the financial statements are free from material

misstatement.

6. An audit involves performing procedures to obtain audit evidence about the amounts and

disclosures in the financial statements. The procedures selected depend on the auditor’s


judgement, including the assessment of the risks of material misstatement of the financial

statements, whether due to fraud or error. In making those risk assessments, the auditor

considers internal control relevant to the entity’s preparation and fair presentation of the financial

statements in order to design audit procedures that are appropriate in the circumstances,

but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal

control.

7. An audit also includes evaluating the: appropriateness of accounting policies used reasonableness of accounting estimates made by management overall presentation of the financial statements.

8. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis

for my audit opinion.

Basis of accounting

9. The FIC’s policy is to prepare financial statements on the basis of accounting determined by

the National Treasury, as set out in the accounting policies (Basis of preparation).

Opinion

10. In my opinion the financial statements present fairly, in all material respects, the financial

position of the FIC as at 31 March 2008 and its financial performance and cash flows for

the year then ended, in accordance with the basis of accounting determined by the National

Treasury, as set out in the accounting policies (Basis of preparation) and in the manner

required by the PFMA.

OTHER MATTERWithout qualifying my audit opinion, I draw attention to the following matter that relates to my

responsibilities in the audit of the financial statements:

Matters of governance

11. The PFMA tasks the accounting authority with a number of responsibilities concerning

financial and risk management and internal control. Fundamental to achieving this is the

implementation of certain key governance responsibilities, which I have assessed as follows:

Matter of governance Yes No

Audit committee

• The FIC had an audit committee in operation throughout the financial year. X

• The audit committee operates in accordance with approved, written terms of reference. X

• The audit committee substantially fulfilled its responsibilities for the year, as set out in section 77 of the PFMA and Treasury Regulation 27.1.8.

X


Matter of governance Yes No

Internal audit

• The FIC had an internal audit function in operation throughout the financial year. X

• The internal audit function operates in terms of an approved internal audit plan. X

• The internal audit function substantially fulfilled its responsibilities for the year, as set out in Treasury Regulation 27.2.

X

Other matters of governance

• The annual financial statements were submitted for auditing as per the legislated deadlines (section 55 of the PFMA).

X

• The financial statements submitted for auditing were not subject to any material amendments resulting from the audit.

X

• No significant difficulties were experienced during the audit concerning delays or the unavailability of expected information and/or the unavailability of senior management.

X

• The prior year’s external audit recommendations have been substantially implemented. X

OTHER REPORTING RESPONSIBILITIESREPORT ON PERFORMANCE INFORMATION

12. I have reviewed the performance information as set out on pages 42 to 50.

Responsibility of the accounting authority for the performance information

13. The accounting authority has additional responsibilities as required by section 55(2)(a) of

the PFMA to ensure that the annual report and audited financial statements fairly present the

performance against predetermined objectives of the public entity.

Responsibility of the Auditor-General

14. I conducted my engagement in accordance with section 13 of the PAA read with General

Notice 616 of 2008, issued in Government Gazette No. 31057 of 15 May 2008.

15. In terms of the foregoing my engagement included performing procedures of an audit nature to

obtain sufficient appropriate evidence about the performance information and related systems,

processes and procedures. The procedures selected depend on the auditor’s judgement.

16. I believe that the evidence I have obtained is sufficient and appropriate to provide a basis for

the audit findings reported below.

Audit findings (performance information)

Non-compliance with regulatory requirements

17. The strategic plan of the FIC included additional objectives and outcomes that does not relate

to the key performance measures and indicators for assessing the entity’s performance in

delivering the desired outcomes and objective.


Objectives reported in annual report, but not predetermined as per strategic plan

18. Some of the objectives that are reported in the annual report of the FIC were not included as

predetermined objectives in the strategic plan.

APPRECIATION19. The assistance rendered by the staff of the FIC during the audit is sincerely appreciated.

Pretoria

31 July 2008


ANNUAL FINANCIAL STATEMENTS31 March 2008

The Annual Financial Statements for the year ended 31 March 2008, set out in pages 60 to 89

have been approved by the Accounting Authority in terms of section 21 (1) of the Public Finance

Management Act, No 1 of 1999 on 30 May 2008, and are signed on their behalf by :

Murray Michell – Director Alice Puoane – CFO

Financial Statements

annual report

2008fic

59

Financial Statements60

STATEMENT OF FINANCIAL POSITION

AS AT 31 MARCH 2008

Notes 2008 2007

R’000 R’000

ASSETS

Current assets 1 646 32 345

Cash and cash equivalents 1 1 180 31 767

Receivables 2 373 176

Prepayments 3 93 402

Non-current assets 26 586 5 994

Intangible assets 4 5 496 2 760

Property, plant and equipment 5 20 542 2 892

Financial lease assets 6 548 342

Total assets 28 232 38 339

LIABILITIES

Current liabilities 11 322 5 677

Payables 7 9 897 4 581

Employee benefits 8 1 154 895

Short term lease liability 22 271 201

Non-current liabilities 310 148

Long term lease liability 22 310 148

Total Liabilities 11 632 5 825

Net assets 16 600 32 514

NET ASSETS

Accumulated surpluses 16 577 32 514

Revaluation reserves 23 -

Total net assets 16 600 32 514


STATEMENT OF FINANCIAL PERFORMANCE

FOR THE YEAR ENDED 31 MARCH 2008

Notes 2008 2007

R’000 R’000

Revenue

Transfers from other government entities 9 42 480 -

Interest received 10 1 443 4 227

Other operating revenue 11 62 350

Total revenue 43 985 4 577

Expenditure

Personnel expenses 12 34 241 21 692

Administrative expenses 13 23 876 21 825

Depreciation and amortisation expense 14 1 621 1 321

Finance Costs 15 67 14

Audit Committee members fees 16 108 33

Total expenditure 59 913 44 885

Loss on forex 9 20

Deficit for the year 15 937 40 328


STATEMENT OF CHANGES IN NET ASSETS


Revaluation Reserve

Accumulated Surplus / (Deficit)

Total

Balance at 31 March 2006 - 72 842 72 842

Deficit for the period - (40 321) (40 321)

Balance at 31 March 2007 - 32 521 32 521

Prior year adjustments - (7) (7)

Restated balance at 31 March 2007 - 32 514 32 514

Surplus on revaluation 23 - 23

Deficit for the period - (15 937) (15 937)

Balance at 31 March 2008 23 16 577 16 600


CASH FLOW STATEMENT


Notes 2008 2007

R’000 R’000

CASH FLOW FROM OPERATING ACTIVITIES

Cash receipts 42 654 5

Cash paid to suppliers and employees (52 428) (40 057)

Cash utilised in operations 18 (9 774) (40 052)

Interest received 10 1 443 4 227

Net cash outflow from operating activities (8 331) (35 825)

CASH UTILISED IN INVESTING ACTIVITIES

Additions to intangible assets 4 (3 084) (2 869)

Additions to property, plant and equipment 5 (18 671) (963)

Additions to leased assets 6 (434) (385)

Net cash outflow from investing activities (22 189) (4 217)

Finance charges on leased assets (67) (14)

Net cash from financing activities (67) (14)

Net decrease in cash and cash equivalent (30 587) (40 056)

Cash and cash equivalents at beginning of year 31 767 71 823

Cash and cash equivalents at end of year 1 1 180 31 767


ACCOUNTING POLICIES


BASIS OF PREPARATION

The financial statements have been prepared in accordance with the South African Statements of

Generally Accepted Accounting Practice (GAAP) including any interpretations of such Statements

issued by the Accounting Practices Board, with the effective Standards of Generally Recognised

Accounting Practice (GRAP) issued by the Accounting Standards Board replacing the equivalent

GAAP Statement as follows:

Standard of GRAP Replaced Statement of GAAP

GRAP 1: Presentation of financial statements AC101: Presentation of financial statements

GRAP 2: Cash flow statements AC118: Cash flow statements

GRAP 3: Accounting policies, changes in

accounting estimates and errors

AC103: Accounting policies, changes in

accounting estimates and errors

Currently the recognition and measurement principles in the above GRAP and GAAP Statements

do not differ or result in material differences in the items presented and disclosed in the financial

statements. The implementation of GRAP 1, 2 & 3 has resulted in the following changes in the

presentation of the financial statements:

1. Terminology differences:

Standard of GRAP Replaced Statement of GAAP

Statement of financial performance Income statement

Statement of financial position Balance sheet

Statement of changes in net assets Statement of changes in equity

Net assets Equity

Surplus/deficit Profit/loss

Accumulated surplus/deficit Retained earnings

Contributions from owners Share capital

Distributions to owners Dividends

1. The cash flow statement can only be prepared in accordance with the direct method.

2. Specific information has been presented separately on the statement of financial position

such as:


(a) Receivables from non-exchange transactions, including taxes and transfers

(b) Taxes and transfers payable

(c) Trade and other payables from non-exchange transactions

3. Amount and nature of any restrictions on cash balances is required.

Paragraphs 11 – 15 of GRAP 1 have not been implemented due to the fact that the budget reporting

standard has not been developed by the local standard setter and the international standard is not

effective for this financial year. Although the inclusion of budget information would enhance the

usefulness of the financial statements, non-disclosure will not affect the objective of the financial

statements.

Revenue is recognised on an accrual basis and represents the amounts received and receivable by the

Centre. Initial recognition of revenue does not include uncollectible amounts in the estimate.

In terms of section 14 of the Financial Intelligence Centre Act, 2001 (Act no 38 of 2001), Centre

will be funded by:

- Money appropriated annually by Parliament;

- Government grants; and

- Legally acquired donations approved by the Minister of Finance.

FINANCIAL INSTRUMENTS

The financial instruments recognised in the statement of financial position consist of cash at bank and

cash equivalents, receivables, payables and lease liabilities.

Initial recognition

Financial instruments are recognised in the statement of financial position when the Centre becomes

a party to the contractual provisions of a financial instrument.

The Centre does not offset the financial assets and liabilities.

Initial measurement

Financial instruments are initially recognised at fair value.

Subsequent measurement

Subsequent to initial measurement, financial instruments are measured at fair value according to the

following classifications:


- Cash and cash equivalents are measured at fair value;

- A provision for impairment of trade receivables is established when there is objective

evidence that the Centre will not be able to collect all amounts due according to the original

terms of receivables. Significant financial difficulties of the debtor and default or delinquency

in payments are considered indicators that the trade receivable is impaired. The amount of

the provision is the difference between the asset’s carrying amount and the present value of

estimated future cash flows, discounted at the effective interest rate, and

- Payables are subject to normal trace credit terms and relatively short payment cycle.

Effective interest rate method

The effective interest method is a method of calculating the amortised cost of a financial asset or a

financial liability and of allocating the interest income or interest expense over the relevant period.

The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts

through the expected life of the financial instrument or, when appropriate, a shorter period to the net

carrying amount of the financial asset or financial liability.

Amortised cost

Amortised cost is the amount at which the financial asset or financial liability is measured at initial

recognition minus principal repayments, plus or minus the cumulative amortisation using the effective

interest method of any difference between that initial amount and the maturity amount, and minus

any reduction for impairment or uncollectibility.

Cash and cash equivalents

Cash and cash equivalents comprise short-term highly liquid investments that are readily convertible

to a known amount of cash and are subject to an insignificant risk of changes in value.

Cash and cash equivalents are subsequently recorded at fair value which always approximates face value.

Loans and receivables

Trade and other receivables (excluding prepayments and deposits), and loans that have fixed

and determinable payments that are not quoted in an active market are classified as loans and

receivables.

Financial Liabilities held at amortised cost

Finance lease liabilities are included in financial liabilities held at amortised cost.


Finance lease liabilities are subsequently measured at amortised cost using the effective interest rate

method. Interest expense is recognised in the Statement of Financial Performance by applying the

effective interest rate.

LEASES

Leases are classified as both finance and operating leases.

Finance leases are leases that substantially transfer all risks and rewards associated with ownership

of the assets to the Centre, entered into by the Centre. Ownership may not eventually be transferred

to the Centre at the end of the lease period. The lease assets are written off over the duration of the

lease contract which is 36 months.

Operating leases are all other lease agreements that are not classified as finance leases. Operating

lease expenses are charged against surplus on a straight line basis over the term of the lease.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is stated at cost less accumulated depreciation. Depreciation is

calculated on a straight-line basis to write off the cost of each asset to its residual value over the

estimated useful life.

The review of the estimated useful life is performed annually both internally and externally. The

estimated useful lives are as follows:

- Computer equipment 5 years

- Furniture 6 years

- Motor vehicle 5 years

- Office equipment 2 to 5 years

- Fixtures & fittings 5 to 10 years

Gains and losses on disposal of property, plant and equipment are determined by reference to their

carrying amount and are taken into account in determining the operating profit.

The Centre recognises in the carrying amount of an item of property, plant and equipment the cost of

replacing part of such an item when the cost is incurred, if it is probable that additional future economic

benefits embodied within the part will flow to the company and the cost of such item can be measured

reliably. All other costs are recognised in the income statement as an expense when incurred.

At each financial position date, the Centre reviews the carrying amounts of property, plant and

equipment to determine whether there is any indication that those assets may be impaired. If any


such indication exists, the recoverable amount of the asset is estimated in order to determine the

extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount

for an individual asset, the recoverable amount is determined for the cash-generating unit to which

the asset belongs.

The recoverable amount of property, plant and equipment is the greater of an asset’s fair value less

cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted

to their present value using a pre-tax discount rate that reflects current market assessments of the

time value of money and the risks specific to the asset. For an asset that does not generate cash

inflows largely independent of those from other assets, the recoverable amount is determined for the

cash-generating unit to which the asset belongs.

An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit

exceeds its recoverable amount. Impairment losses are recognised in the income statement.

An impairment loss is only reversed if there is an indication that the impairment loss may no longer

exist and there has been a change in the estimates used to determine the recoverable amount. Where

an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is

increased to the revised estimate of is recoverable amount, but so that the increased carrying amount

does not exceed the carrying amount that would have been determined had no impairment loss been

recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is

recognised as income immediately

INTANGIBLE ASSETS

Intangible assets comprise of identifiable, non-monetary assets without assets physical substance.

An intangible asset is recognised when it is probable that the expected future economic benefits

that are attributable to the asset will flow to the entity and the cost of the asset can be measured

reliably. After initial recognition, intangible assets shall be carried at their respective costs less any

accumulated amortization and any accumulated impairment losses.

The review of the estimated useful life is performed annually both internally and externally.

Amortisation is calculated on a straight line basis to allocate the depreciable amount of the intangible

assets on a systematic basis over the useful life. The estimated useful life is as follows:

- Computer software and development 6 years

Subsequent expenditure on capitalized intangible assets is capitalized only when it increases the

future economic benefits embodied in the specific assets to which it relates. All other expenditure is

expenses as incurred


TAXATION

The Financial Intelligence Centre is exempt from income tax in terms of provisions of section 10(1)

(cA) (I) of the Income Tax Act.

REVENUE RECOGNITION

Income

Revenue is recognised on an accrual basis and represents the amounts received and receivable by the

Centre. Initial recognition of revenue does not include uncollectible amounts in the estimate.

In terms of section 14 of the Financial Intelligence Centre Act, 2001 (Act No 38 of 2001), the Centre

will be funded by:

- Money appropriated annually by Parliament;

- Government grants; and

- Legally acquired donations approved by the Minister of Finance.

For the year ending 31 March 2007, the Financial Intelligence Centre received no Parliamentary

allocation, which resulted in a reported net deficit of R40 321m. The National Treasury, on 1 April

2006, ruled that the surplus funds of R32 521m (2006: R72 842m), which relates to Parliamentary

allocation of prior years, should be utilised and depleted before additional funds were transferred to

the Centre. Accordingly, no funds were allocated to the Financial Intelligence Centre during the 2007

financial year.

During the year under review the Centre received the pre-approved allocation from the National

Treasury amounting to R42,480m.

Interest income

Interest is recognised on a time proportion basis as it accrues, unless collectability is in doubt.

EMPLOYEE BENEFITS

Short term employee benefits

The cost of short term employee benefits is recognised during the period in which the employee

renders the related service. The provisions for employee entitlements to salaries, performance

bonuses and annual leave represent the amounts that the Centre has a present obligation to pay


as a result of services provided by employees. The provision has been calculated at undiscounted

amounts based on the current salary rates.

Termination of benefits

Termination benefits are recognised as an expense when the Centre is demonstrably committed,

without realistic possibility of withdrawal, to a formal detailed plan to terminate employment before

the normal retirement date. Termination benefits for voluntary redundancies are recognised if the

Centre has made an offer encouraging voluntary redundancy, it is probable that the offer will be

accepted, and the number of acceptances can be reliably be estimated.

Retirement benefit

The Centre contributes to a defined contribution fund in respect of employees. The contributions are

included in staff costs, in the year to which they relate.

ACCUMULATED SURPLUS

The Centre is allocated an annual budget by Parliament to fund its activities as defined by the Financial

Intelligence Centre Act. It has to apply for retention of its surplus from the National Treasury.

CASH AND CASH EQUIVALENTS

Cash includes cash on hand and cash with banks. For the purposes of cash flow statement, cash and

cash equivalents comprise cash on hand and cash held in the bank.

PROVISIONS

Provisions are recognised when the Centre has a present legal obligation as result of past events,

it is probable that an outflow of resources embodying economic benefits will be required to settle

the obligation, and a reliable estimate of the amount of the obligation can be made. Provisions are

reviewed at each reporting date and adjusted to reflect the current best estimate.

If the effect is material, provisions are determined by discounting the expected future cash flows

that reflect current market assessments of the time value of money and, where appropriate, the risks

specific to the liability.

FOREIGN CURRENCY TRANSACTIONS

Transactions in foreign currencies are converted into South African rands at the rate of exchange ruling

at the date of such transaction. Balances outstanding on the foreign currency monetary items at the

end of the financial year are translated into South African rands at the rates ruling at that date.


Exchange gains and losses on settlement of foreign currency monetary liabilities during the period are

recognised in the Statement of Financial Performance.

GOING CONCERN

There is no indication that the Financial Intelligence Centre will not receive the necessary Parliamentary

allocation, and therefore the Annual Financial Statements have been prepared in accordance with

accounting policies applicable to going concern.

COMPARATIVES

Where necessary, comparative figures have been adjusted to conform to changes in presentation in

the current year.


NOTES TO THE ANNUAL FINANCIAL STATEMENTS


2008

R’000

2007

R’000

1. CASH AND CASH EQUIVALENTS

Cash at bank 1 172 4 764

Cash on deposit 7 27 002

Cash on hand 1 1

1 180 31 767

For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand

and cash held in the banks.

2. RECEIVABLES

Interest receivable 26 21

Deposits 342 47

Salary Related Debtors - 13

Sundry Debtors 5 95

373 176

Discounted amount 369 174

The carrying amount of trade receivables approximates their fair value due to their short-term

maturity.

Salary related debts are interest free and repayable within the following month.

3. PREPAYMENTS

Lease 13 -

Subscriptions 30 388

Membership fees 50 14

93 402


2008

R’000

2007

R’000

4. INTANGIBLE ASSETS

Net carrying value - opening 2 760 214

Cost – opening 3 426 557

Accumulated amortisation - opening (666) (343)

Additions 3 084 2 869

Amortisation 14 (348) (323)

Net carrying value - closing 5 496 2 760

Cost – closing 6 510 3 426

Accumulated amortisation - closing (1 014) (666)

Change in estimate of useful life

During the year ended 31 March 2008 the Centre conducted an annual review of the useful live of

its property, plant and equipment, which resulted in changes in the expected usage. The outcomes

from the reviews are as follows:

Computer software’s useful life extended to 5 years from 2 years useful life Cellular phones reduced useful life from 5 years to 2 years Computer hardware’s useful life extended to 5 years from 3 years

The effect of these changes on depreciation and amortisation expense, in the current and future

periods is as follows:

Decrease in amortisation – Computer software (902) (199)

Increase depreciation – Cellular phones 5 -

Decrease depreciation – Computer hardware (717) -


5. PROPERTY, PLANT AND EQUIPMENT

Computer Hardware

OfficeEquipment

Fixtures and

Fittings

Motor Vehicle

Furniture Total

R’000 R’000 R’000 R’000 R’000 R’000

31 March 2008

Cost – opening 2 615 1 135 1 367 - 481 5 598

Accumulated depreciation - opening (1 699) (426) (443) - (138) (2 706)

Net carrying value - opening 916 709 924 - 343 2 892

Additions 10 950 797 5 926 129 869 18 671

Depreciation (456) (188) (277) - (124) (1 045)

Revaluations (18) (5) - - - (23)

Cost (595) (69) - - - (664)

Accumulated depreciation 613 74 - - - 687

Cost – closing 12 970 1 863 7 293 129 1 350 23 605

Accumulated depreciation - closing (1 542) (539) (720) - (262) (3 063)

Net carrying value - closing 11 428 1 324 6 574 129 1 088 20 542

31 March 2007

Cost – opening 2 391 973 1 279 - 481 5 124

Accumulated depreciation - opening (1 726) (218) (220) - (62) (2 226)

Net carrying value - opening 665 755 1 059 - 419 2 898

Additions 705 167 88 - - 960

Reallocation – cost 6 (3) - - - 3

Reallocation – accumulated depreciation (2) (2) - - - (4)

Cost – disposal (487) (2) - - - (489)

Accumulated depreciation - disposal 478 1 - - - 479

Disposal - carrying value (9) (1) - - - (10)

Depreciation (449) (207) (223) - (76) (955)

Cost – closing 2 615 1 135 1 367 - 481 5 598

Accumulated depreciation - closing (1 699) (426) (443) - (138) (2 706)

Net carrying value - closing 916 709 924 - 343 2 892


Notes 2008

R’000

2007

R’000

6. FINANCIAL LEASE ASSETS

Bizhub photocopiers

Cost – opening 385 -

Accumulated depreciation – opening (43) -

Net carrying value - opening 342 -

Additions 434 385

Depreciation 14 (228) (43)

Cost – closing 819 385

Accumulated depreciation - closing (271) (43)

Net carrying value - closing 548 342

7. PAYABLES

Accruals 6 769 2 396

Salary related accruals 1 066 650

Audit Committee: member fees - 33

Performance bonuses 2 062 1 502

9 897 4 581

Discounted amount 9 779 4 533

The carrying amount of trade payables approximates their fair value due to their short-term maturity.

8. EMPLOYEE BENEFITS

Provision for Leave

An obligation might arise if an employee is retrenched, dismissed or resigns subsequent to year end

due to annual leave days accruing at reporting date to employees at BCEA rates.

Provision for Leave 1 154 895

Opening balance 895 355

Movement in provision 259 540

1 154 895

Discounted amount 1 140 886


Notes 2008

R’000

2007

R’000

9. TRANSFERS FROM OTHER GOVERNMENT ENTITIES

Parliamentary allocation 42 480 -

Parliament allocates an amount to the Financial Intelligence Centre in terms of an approved Medium

Term Expenditure Framework.

10. INTEREST RECEIVED

Current Account 492 245

Investment Account 951 3 982

1 443 4227

The effective interest rates on cash at bank were between 12, 5% and 14, 5% in the year under

review.

11. OTHER OPERATING REVENUE

Recoveries 62 350

12. PERSONNEL EXPENSES

Salary costs 27 759 17 529

Bonus performance 2 062 1 377

Group life 700 282

Medical aid contributions 1 052 857

Provident fund 2 483 1 549

UIF 125 77

WCA 60 21

34 241 21 692


Notes 2008

R’000

2007

R’000

13. ADMINISTRATIVE EXPENSES

Administration fees 210 113

Audit fees 1 550 772

- External 565 582

- Internal 985 190

Advertising 65 25

Advisory services - 2

Bank charges 30 34

Cleaning expenses 42 13

Computer costs 322 2 684

Conferences 33 70

Courier & postage 12 29

FATF – development programme 304 -

FIC Academy 10 338

Insurance 63 264

Lease costs 75 386

Legal fees 34 -

Loss on disposal - 12

Media, subscriptions and library 597 815

Membership fees 235 258

Office consumable and refreshments 299 359

Parking – staff 386 165

Printing & stationery 552 210

Professional fees 6 104 6 648

Public Awareness - 999

Recruitment & placement cost 1 972 461

Redeployment costs 304 211

Refurbishment costs - -

Removal expenses 16 -

Rent paid 3 174 388

Repairs & maintenance 205 44

Research costs 405 -

RSC Levies - 18

Security 159 -

Staff training 1 847 1 415

Subsistence and accommodation – local 627 222

Subsistence and accommodation – overseas 508 770

Balance c/fwd 20 140 17 725


ANNUAL FINANCIAL STATEMENTS

Notes 2008

R’000

2007

R’000

Balance c/fwd 20 140 17 725

Telephones, fax and internet 785 640

Travel – local 1 567 1 016

Travel – international 1 063 2 300

Water & electricity 184 76

Workshop 25 61

Written off small assets 112 7

23 876 21 825

14. DEPRECIATION AND AMORTISATION

Amortisation on intangible assets 4 348 323

Depreciation on PPE 5 1 045 955

Depreciation on leased assets 6 228 43

1 621 1 321

15. FINANCE COSTS

Finance charges on leased assets 67 14

16. AUDIT COMMITTEE MEMBERS FEES

Chairperson: C Kneale 45 15

Other members: B Lengane 26 10

N Khumalo 37 8

108 33

17. RETIREMENT CONTRIBUTIONS

Employees of the Centre are members of Liberty Life Umbrella Provident fund. This fund is a defined

contribution fund and it is governed by the Pension Fund Act, 1956 as amended. The contribution

rate by the employer is 11.25% (2007:11.25%) and is calculated on retirement funding income.

Provident Fund contributions 12 2 483 1 549


Notes 2008

R’000

2007

R’000

18. CASH UTILISED IN OPERATIONS

Deficit for the year (15 937) (40 328)

Adjustments for:

Amortisation 347 323

Depreciation – PPE 1 045 955

Depreciation – leased assets 229 43

Correction of depreciation - 4

Leave provision 259 540

Interest received (1 443) (4 227)

Finance charges 67 14

Loss on disposal - 10

Operating deficit before (15 433) (42 666)

working capital changes

Working capital changes:

(Increase) / decrease in accounts receivable 112 (341)

Increase /(decrease) in accounts payable 5 547 2 955

Cash utilised in operations (9 774) (40 052)

19. OPERATING LEASE

Operating leases are all those leases whose duration is 12 months and the risks are not transferred to

the Centre because as and when equipment breaks the lessor replaces without charge.

20. ACCUMULATED SURPLUS

During the year under review the accumulated surplus decreased to R16,577m (2007: R32,514m)

due to insufficient budgetary allocation received for the current year under review.


21. RELATED PARTY TRANSACTIONS

During the year under review the Centre entered into various transactions with related parties.

Transactions with related parties:

2008

R’000

2007

R’000

21.1. State Controlled Entities

Receiving Services 413 244

Telkom 413 244

Lease - building 416 464

SARS 416 464

21.2. Key Management Personnel

Name Position CashComponent

Bonus UIF Provident Fund

Group Life Medical Aid

Total

MSR Michell Director 823 650 - 1 448 - - 19 350 844 448

CCM Malan Snr Manager: CAP

770 645 82 200 1 448 80 021 22 471 19 350976 135

P Smit Snr Manager:L&P 745 835 79 500 1 448 77 445 23 006 19 350 946 586

A Puoane CFO 676 247 72 100 1 448 70 219 18 858 19 350 858 225

U M’Crystal Snr Manager: M&A

623 729 - 1 074 - - - 624 803

N Mewalall Snr Manager: M&A

551 943 - 1 448 51 788 13 436 19 350 640 938

22. FINANCE LEASE

Finance lease obligation 581 349

The Finance leases are in respect of Bizhub photocopiers. The lease periods as shown below have the

option of renewal at the end of the periods.


Repayment of finance lease

Not later than 1 year

Later than 1 year and not later than

5years

Later than 5 years Total

Future minimum lease payment 326 462 333 161 - 659 623

Finance costs 55 165 23 085 - 78 250

Net Present value 271 297 310 076 - 581 373

R’000

2008

R’000

2007

Total Lease obligation 581 349

Less short term portion 271 118

Long term lease obligation 310 231

Within 1 year 271 118

Within 2 – 5 years 310 231

23. RISK DISCLOSURE FOR FINANCIAL INSTRUMENTS

Market Risk

The Centre’s activities expose it primarily to the risks of fluctuations in interest rates and foreign

currency risk.

Interest rate risk refers to the risk that the fair value of future cash flows of a financial instrument will

fluctuate because of changes in market interest rates.

Foreign currency risk refers to the risk that the fair value or future cash flows of a financial instrument

will fluctuate because of changes in foreign exchange rates

Interest rate risk Management

The Centre’s interest rate profile consists of fixed and floating rate loans and bank balances which

exposes the entity to fair value interest rate risk and cash flow interest rate risk and can be summarised

as follows:

Financial Assets

Bank deposits linked to South African prime rate


Financial liabilities

Finance lease at a fixed rate of interest

Management manages interest rate risk by negotiating beneficial rates on floating rate loans and

where possible using fixed rate loans.

Foreign Currency risk management

Management accepts the risks as a result of changes in rate of exchange and therefore has not hedged

foreign currency risk.

Credit Risk management

Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in

financial loss to the Entity.

Maximum Exposure to credit risk

The Centre’s exposure to credit risk with regards to loans and receivables are limited.

Liquidity Risk Management

Liquidity risk is the risk that the Centre will not be able to meet its financial obligations as they fall

due. In terms of its borrowing requirements, the Centre ensures that adequate funds are available to

meet its expected and unexpected financial commitments

24. PRIOR YEAR ERROR

During the year under review the Centre changed its accounting policy of the previous years’ operating

lease in order to conform with the requirements of the latest accounting standard on finance lease.

Previously the Centre charged all the operating lease expenses against the financial performance in the

period when they were incurred, to provide more reliable and relevant information the management

is of the opinion that the treatment of finance costs and capital reduction on lease liability will be

consistent with best practice.

The change in accounting policy has been accounted for retrospectively and the comparative figures

for 2007 have been restated. The effect of is as follows:


Effect on 2007 Prior-year

disclosure

Effect of error Restated figures

Financial position -

Increase in leased assets - 385 385

Increase in lease liabilities - (349) (349)

Increase in accumulated depreciation - (43) (43)

Total - (7) (7)

Financial performance

Increase in finance costs - 14 14

Decrease in lease expenses 436 (50) 386

Increase in depreciation - 43 43

Total 436 7 443

Material & Signifi cant Framework

annual report

2008fic

85

Material & Signifi cant Framework86

MATERIALITY AND SIGNIFICANT FRAMEWORK

31 March 2008

1. BACKGROUND

This document was developed to give effect to the May 2002 amendment to the Treasury Regulations, whereby the following new requirement was placed on public entities:

Section 28.1.5 –

“For purposes of material [sections 50(1), 55(2) and 66(1) of the Public Finance Management

Act (PFMA)] and significant [section 54(2) of the PFMA], the accounting authority must

develop and agree a framework of acceptable levels of materiality and significance with the

relevant executive authority.”

SAAS 320.03 defines materiality as follows:

“Information is material if its omission or misstatement could influence the economic

decisions of users taken on the basis of the financial statements. Materiality depends

on the size of the item or error judged in the particular circumstances of its omission or

misstatement. Thus, materiality provides a threshold or cut-off point, rather than being a

primary qualitative characteristic which information must have if it is to be useful.”

Accordingly, we will be dealing with this framework under two main categories, the quantitative and qualitative aspects.

2. QUANTITATIVE ASPECTS

MATERIALITY LEVEL

Different levels of materiality can be set for different classes of transactions. We have however taken the approach of setting a relatively conservative materiality level that will be used for all classes of transactions.

In determining the said materiality value we also took cognisance of the following factors:

Nature of the Centre’s business

The Centre is now 5 years in existence as at the end of the period under review it continues to be an

operational cost driven organisation. Thus the materiality value is based on the cash outflows of the year.


The Supply Chain Management prescripts

Statutory requirements

The Centre is a statutory body that has been formed to give effect to the Financial Intelligence Centre

Act, and has been listed as a Public Finance Management Act (PFMA) Schedule 3A public entity. It

was accordingly decided to give preference to a relatively low level of materiality due to the Centre

being so closely governed by various acts and the public accountability and responsibility it has to its

stakeholders.

In assessing the control, risk of the Centre, and concluding a low materiality level at cognisance was

given to the following factors:

The Director and the CFO are less involved in the day to day operations of the Centre, i.e. to

authorise and approve all procurement transactions, but are mainly involved in approval of

payments. The function of Supply Chain Management is headed by consultants from reputable firms. The Centre has contracted its Internal Audit services from a reputable firm for a period of three

years. The Centre re-evaluates its Risk Management Strategy annually and implements appropriate

internal controls to mitigate the identified risks.

3. QUALITATIVE ASPECTS

Items or transactions may be material not due to the amounts involved, but on qualitative grounds.

These qualitative grounds may include amongst other the following:

Any new ventures that the Centre may enter into. Unusual transactions entered into that are not of a repetitive nature and are disclosable purely

due to the nature thereof due to knowledge thereof affecting the decision making of the user

of the financial statements. Transactions entered into that could result in reputational risk to the Centre. Any fraudulent or dishonest behavior of an officer or staff of the Centre at senior or management

level.

4. APPLICATION OF THE FIC MATERIALITY FRAMEWORK TO THE PFMA

Procedures/processes required by legislation or regulation (e.g. PFMA and the Treasury Regulations).

The table below indicates the Centre’s application of materiality on the relevant sections of the

PFMA.


STAT

UTO

RY A

PPLI

CAT

ION

OF

TH

E M

ATER

IALI

TY

FR

AM

EWO

RK

PFM

A S

EC

TIO

NQ

UA

NTI

TATI

VE A

SPEC

TSQ

UA

LITA

TIV

E A

SPEC

TS

Sect

ion

50

(1

)

The

acco

untin

g au

thor

ity fo

r a

publ

ic e

ntity

mus

t –

• on

req

uest

, di

sclo

se t

o th

e ex

ecut

ive

auth

ority

re

spon

sibl

e fo

r th

at p

ublic

ent

ity o

r th

e le

gisl

atur

e to

whi

ch t

he p

ublic

ent

ity is

ac

coun

tabl

e, a

ll m

ater

ial f

acts

, in

clud

ing

thos

e re

ason

ably

dis

cove

rabl

e, w

hich

in a

ny w

ay

influ

ence

the

dec

isio

n or

act

ions

of t

he e

xecu

tive

auth

ority

or

that

legi

slat

ure;

and

Any

fact

s di

scov

ered

whi

ch in

agg

rega

te e

xcee

d th

e m

ater

ialit

y fig

ure,

whi

ch w

ill b

e ca

lcul

ated

on

a ye

arly

bas

is in

ter

ms

of

para

grap

h 2

.1.

Any

item

or

even

t of

whi

ch s

peci

fic

disc

losu

re is

req

uire

d by

Law

.

Any

fact

s di

scov

ered

by

whi

ch it

s om

issi

on o

r m

isst

atem

ent,

in t

he

opin

ion

of t

he C

entr

e, c

ould

influ

ence

th

e de

cisi

ons

or a

ctio

ns o

f the

exe

cutiv

e au

thor

ity o

r th

e le

gisl

atur

e.

Sect

ion

55

Ann

ual r

epor

t an

d fin

anci

al s

tate

men

ts

The

annu

al r

epor

t an

d fin

anci

al s

tate

men

ts r

efer

red

to in

sub

sect

ion

(1)(

d) m

ust

–

• fa

irly

pres

ent

the

stat

e of

affa

irs o

f the

pub

lic

entit

y, it

s bu

sine

ss,

its fi

nanc

ial r

esul

ts, its

pe

rfor

man

ce a

gain

st p

rede

term

ined

obj

ectiv

es

and

its fi

nanc

ial p

ositi

on a

s at

the

end

of t

he

finan

cial

yea

r co

ncer

ned;

• In

clud

e pa

rtic

ular

s of

any

mat

eria

l los

ses

thro

ugh

crim

inal

con

duct

and

any

irre

gula

r ex

pend

iture

and

frui

tless

and

was

tefu

l ex

pend

iture

tha

t oc

curr

ed d

urin

g th

e fin

anci

al

year

.•

Any

crim

inal

or

disc

iplin

ary

step

s ta

ken

as

a co

nseq

uenc

e of

suc

h lo

sses

or

irreg

ular

ex

pend

iture

or

frui

tless

and

was

tefu

l exp

endi

ture

;

Loss

es t

hrou

gh c

rimin

al c

ondu

ct –

all

loss

es t

hat

are

lega

lly

conf

irmed

and

if t

he a

mou

nt e

xcee

ds t

he m

ater

ialit

y le

vel.

Loss

es t

hrou

gh ir

regu

lar/f

ruitl

ess

/was

tefu

l exp

endi

ture

whe

re

tran

sact

ions

/act

ions

are

lega

lly c

onfir

med

– if

the

am

ount

ex

ceed

s th

e m

ater

ialit

y le

vel a

s de

term

ined

in s

ectio

n 2

.1.

The

follo

win

g w

ill b

e ta

ken

into

acc

ount

in

mea

surin

g m

ater

ialit

y fo

r pr

esen

tatio

n:•

Dis

clos

ure

requ

irem

ents

,•

Com

plia

nce

with

legi

slat

ive

requ

irem

ents

, re

gula

tions

and

po

licie

s,•

Poss

ible

una

utho

rized

exp

endi

ture

th

at m

ust

be li

sted

and

rep

orte

d.

1.

Loss

es t

hrou

gh c

rimin

al c

ondu

ct –

all

loss

es t

hat

are

lega

lly c

onfir

med

and

if

the

amou

nt e

xcee

ds t

he m

ater

ialit

y le

vel.

2.

Loss

es t

hrou

gh ir

regu

lar/f

ruitl

ess

/was

tefu

l exp

endi

ture

whe

re

tran

sact

ions

/act

ions

are

lega

lly

conf

irmed

– if

the

am

ount

exc

eeds

th

e m

ater

ialit

y le

vel a

s de

term

ined

in

sect

ion

2.1

.


PFM

A S

EC

TIO

NQ

UA

NTI

TATI

VE A

SPEC

TSQ

UA

LITA

TIV

E A

SPEC

TS

Sect

ion

66

(1

)

Res

tric

tions

on

borr

owin

g, g

uara

ntee

s an

d ot

her

com

mitm

ents

(1)

An

inst

itutio

n to

whi

ch t

his

Act

app

lies

may

no

t bo

rrow

mon

ey o

r is

sue

a gu

aran

tee,

inde

mni

ty

or s

ecur

ity,

or e

nter

into

any

oth

er t

rans

actio

n th

at

bind

s or

may

bin

d th

at in

stitu

tion

or t

he R

even

ue

Fund

to

any

futu

re fi

nanc

ial c

omm

itmen

t, u

nles

s su

ch b

orro

win

g, g

uara

ntee

, in

dem

nity

, se

curit

y or

ot

her

tran

sact

ion-

is a

utho

rised

by

this

Act

, an

d in

the

cas

e of

pub

lic e

ntiti

es,

is a

lso

auth

oris

ed b

y ot

her

legi

slat

ion

not

in c

onfli

ct w

ith t

his

Act

.

All

tran

sact

ions

not

in c

ompl

ianc

e w

ith S

66

(1

).

Sect

ion

54

Info

rmat

ion

to b

e su

bmitt

ed b

y ac

coun

ting

auth

oriti

es.

Bef

ore

a pu

blic

ent

ity c

oncl

udes

any

of t

he fo

llow

ing

tran

sact

ions

, th

e ac

coun

ting

auth

ority

for

the

publ

ic e

ntity

mus

t pr

ompt

ly a

nd in

writ

ing

info

rm

the

rele

vant

tre

asur

y of

the

tra

nsac

tion

and

subm

it re

leva

nt p

artic

ular

s of

the

tra

nsac

tion

to it

s ex

ecut

ive

auth

ority

for

appr

oval

of t

he t

rans

actio

n:

esta

blis

hmen

t or

par

ticip

atio

n in

the

est

ablis

hmen

t of

a c

ompa

ny

part

icip

atio

n in

a s

igni

fican

t pa

rtne

rshi

p, t

rust

, un

inco

rpor

ated

join

t ve

ntur

e or

sim

ilar

arra

ngem

ent;

acqu

isiti

on o

r di

spos

al o

f a s

igni

fican

t sh

areh

oldi

ng

in a

com

pany

;

acqu

isiti

on o

r di

spos

al o

f a s

igni

fican

t as

set;

Com

men

cem

ent

or c

essa

tion

of a

sig

nific

ant

busi

ness

act

ivity

Any

est

ablis

hmen

t or

par

ticip

atio

n in

the

est

ablis

hmen

t of

a

com

pany

, irr

espe

ctiv

e of

the

am

ount

Any

par

tner

ship

, tr

ust,

uni

ncor

pora

ted

vent

ure

or s

imila

r ar

rang

emen

t, ir

resp

ectiv

e of

am

ount

Any

acq

uisi

tion

or d

ispo

sal o

f sha

reho

ldin

g, ir

resp

ectiv

e of

am

ount

.

Ass

et a

cqui

sitio

n or

dis

posa

ls t

hat

exce

ed R

10

mill

ion

in v

alue

Any

com

men

cem

ent

or c

essa

tion

of s

igni

fican

t ac

tivity

, irr

espe

ctiv

e of

am

ount

90Notes

1145 FIC Annual Report 2008.indd - Financial Intelligence ...

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