Powerhouse: Charl Geel - Departmental Head: FICA Supervision Department

Interview by Kea Koffman – Communications and Language Services (FSCA)

On 24 February 2023, the Financial Action Task Force (FATF) took the decision to include South Africa on its "grey list", thereby classifying it as a jurisdiction under increased monitoring. This decision followed the mutual evaluation report published by the FATF in 2021, in which South Africa's compliance with the FATF 40 Recommendations and the level of effectiveness of South Africa's anti-money laundering (AML) and counter-terrorist financing (CTF) systems were assessed. These can have negative impacts on investment, capital flow and the country's financial system. As this also presents the opportunity to strengthen AML/CTF systems, it means the work that AML/CFT specialists do becomes that much more valuable not only in the regulatory space but for ordinary citizens. We spoke to Mr Charl Geel, Head of the FICA Supervision department, on the work being undertaken to address this while also getting to know him a little bit better.

1. Please tell us a little bit about yourself and your journey with the FSCA?

I am an admitted advocate and a certified anti-money laundering specialist. My career started with the National Prosecution Authority where I worked for 15 years. Thereafter, I joined the Financial Intelligence Centre where I started the supervision and enforcement unit. I joined the FSCA on 1 September 2018 as a senior specialist in the Office of General Counsel. My main role in OGC was to provide advice and guidance in AML/CFT matters. I was appointed as head of the FICA Supervision Department on 1 January 2022. The name of the department was changed earlier this year to the AML/CFT Supervision Department.

2. You are currently the Departmental Head for FICA Supervision. What is the department responsible for and what do some of your duties entail?

The department’s main function is to supervise and enforce compliance with the Financial Intelligence Centre Act by accountable institutions (financial services providers, collective investment scheme managers and authorized users of an exchange) regulated by the FSCA. We are also responsible for liaising with the Financial Intelligence Centre (FIC). The liaising relates to referrals and information to and from the FIC. As authorized officers we have the authority to receive confidential information from the FIC and route it to the right department to take action.

3. In general, what are some of the noteworthy milestones achieved since assuming leadership of the department?

I must give credit to my management team, Michele Fourie, Mpho Radebe and Kgomotso Molefe for achieving some important milestones. Without them it would not have been possible. Some of the milestones are:

• The AML/CFT sector risk assessment in the Collective Investment Scheme, Financial Services Providers and Securities sectors were completed and published. 
• Inspections are now based on AML/CFT risks and not market conduct risks as prescribed by the Financial Action Task Force. 
• The first joint AML/CFT inspection was conducted with the Prudential Authority. 
• We also drafted an AML/CFT supervisory and enforcement manual for all supervisors that was adopted by all. 
• We won our first appeal at the FIC Act Appeal Board. The appellant argued that the sanction the FSCA imposed was not appropriate. This argument was rejected by the Appeal Board who emphasized the importance of FIC Act compliance. Thanks to Barend Bredenkamp from OGC for arguing this matter. 
• We are building capacity in the AML/CFT Department and will recruit 9 people for this year with more positions to be filled in the next two years.

4. South Africa was recently greylisted, what are the major implications of this?

When a country is placed on the grey list, it is subject to increased monitoring by the Financial Action Task Force. Grey listed jurisdictions could face potential problems such as lack of trade opportunities, a downgrade in ratings, difficulty in obtaining financing from global bodies such as International Monetary Fund and a subsequent shrinking economy. Financial institutions are also experiencing enhanced due diligence from their counterparts.

5. What is the FSCA currently doing to address this issue?

The FSCA has an action plan to address the remedial actions applicable to it. There are two action items applicable to the FSCA that has to be addressed: 

• South Africa should strengthen the AML/CFT supervisory capacity (human and financial resources) of FSCA. 
• South Africa should demonstrate that all AML/CFT supervisors apply and monitor implementation of follow-up remedial actions and that effective, proportionate, and dissuasive sanctions are being applied. 

In addition, the FSCA is also working on two other deficiencies that were regarded as not strategic for the grey listing: 

• All regulatory authorities should subject beneficial owners to fit and proper tests and verify that directors, senior managers and beneficial owners or their associates are not criminals as part of market entry controls and apply this standard upon renewal of current market participants and on an ongoing basis.
• Financial groups should be required to implement group-wide programmes against money laundering and terrorist financing, including policies and procedures for sharing information within the group for AML/CFT purposes. 

The following implementation plan is followed by the FSCA: 

Fit and proper tests of beneficial owners, directors, and senior managers 

The FSCA has collected beneficial ownership information. The beneficial owners, directors and senior management will be subjected to bulk criminal checks in the next few months.

Supervision of financial groups

• Inspections will focus on implementation of group controls where the financial institution is part of a group. 
• Conduct joint inspections and share information with the PA on financial groups. 
• Identify financial institutions that are part of a group with foreign branches or subsidiaries and request the foreign regulator for information on AML/CFT compliance by the foreign branch/ subsidiary. 

Increase of resources 

The AML/CFT Department will recruit an additional 29 analysts over the next 3 years. This will result in an increase of supervisory activity. The new personnel will be trained to conduct effective supervision of AML/CFT. We hope to get some assistance from the World Bank in this regard.

Effective, proportionate, and dissuasive remedial actions and sanctions

• The AML/CFT Supervision Department will conduct follow up inspections to ensure that remedial action/ sanctions have been adhered to. 
• The enforcement manual will be reviewed to ensure it makes provisions for effective, proportionate, and dissuasive sanctions. 
• More awareness will be created on sanctions issued to ensure that the sanctions are effective and dissuasive. 
• The use of a full suite of enforcement action will be applied in deserving cases.  

6. What can financial institutions do to contribute to South Africa being removed off the greylist?

• Understand the money laundering and terrorist financing risks applicable to them. The institutions should conduct business risk assessments. The sector risk assessments conducted by the FSCA will be of valuable assistance. The sector risk assessments are published on the FSCA website. 
• Conduct enhances due diligence on high-risk clients 2023.uding Political Exposed Persons, especially in light of the new definition of PEPs which states, ‘once a PEP always a PEP’. 
• Increase the submission of suspicious transaction reports to the FIC. 
• The boards of financial institutions must be well aware of their duties to ensure compliance with the FIC Act and implementation of the RMCP by their institutions. Sanctions may be imposed on the board if they fail to ensure compliance with the FIC Act. There is currently a big emphasis on the importance of the role of the boards in AML/CFT compliance. 
• The financial institutions should immediately remediate non-compliance and remain compliant with the FIC Act obligations. That is how we will demonstrate that remedial actions and sanctions are effective, dissuasive, and proportionate.

7. When it’s all said and done, what do you want your legacy to be in the FIC Supervision environment?

The father of AML/CFT in the FSCA 😊. To make the FSCA an effective supervisor for AML/CFT. Also assisting the FSCA to fight financial crime.

 8. What’s one thing people would be surprised to learn about you?

I was a rugby referee for the Golden Lions for 7 years.