Compliance: rogue law firms subject to R50m penalty
LAWYERS and their firms have been warned that they could face disciplinary action and administrative penalties of up to R50million for failing to comply with the Financial Intelligence Centre (FIC) Act.
The centre will report lawyers and their firms who are non-compliant with the FIC Act to the Legal Practice Council (LPC) where they face administrative penalties between R10m and R50m.
The LPC has warned legal practitioners that they could face disciplinary charges for breaching their code of conduct by failing to take all steps necessary to ensure compliance with the FIC Act at all times.
The lawyers have been told that they could face administrative sanctions ranging from a caution, reprimand, directive to take remedial action or make specific arrangements, restriction or suspension of certain specified business activities.
They could also face financial penalties of R10m for “natural persons” and R50m for “legal persons”. According to the LPC, the FIC conducted 207 compliance inspections and nine compliance reviews in the 12 months that ended on March 31 to assess the level of compliance by legal practitioners.
”In respect of the 207 compliance inspections, approximately 80% of the legal practitioners were noncompliant, with the most common noncompliance relating to failure to register with the FIC, failure to have a risk management and compliance programme, failure to conduct customer due diligence and failure to report,” reads an LPC advisory dated June 17.
The FIC found that the majority of the reports submitted to it by legal practitioners were cash threshold reports, which indicated that cash was used to pay for legal services. The 2 493 cash threshold reports indicated that there were increased risks of money-laundering in the legal fraternity.
An average of 231 suspicious transaction reports were filed by lawyers during the same period ending on March 31.
The council has undertaken to improve compliance.
“The LPC will be issuing a series of advisories to raise awareness to legal practitioners in addressing the findings of non-compliance issued by the FIC, but legal practitioners are advised to ensure as a matter of urgency that they are aware of all their obligations under the FIC Act and that they become compliant before any further inspections are conducted,” the council further warned.
The requirements to ensure compliance apply to all practising attorneys and trust account advocates in order to uphold the country’s international anti-money-laundering and combating the financing of terrorism obligations and commitments.
The SA Reserve Bank’s Prudential Authority, the Financial Sector Conduct Authority and the FIC have also warned accountable institutions such as the LPC that cannot demonstrate compliance with obligations that they still remain in force and that its members may face administrative sanctions.
Last week, Justice and Correctional Services Minister Ronald Lamola said the government was determined to tackle and arrest money-laundering schemes.
An anti-money-laundering/ counter-terrorism financing national risk assessment inter-departmental working group has recently had some strategic breakthroughs and recovered over R400m.
The working group includes the SAPS, the Hawks, the Sars, the FSCA, the FIC, the Special Investigating Unit, the National Prosecuting Authority and the SA Reserve Bank.