Objective of this Joint Communication This Joint Communication
(Communication) sets out the responses by the Prudential Authority (PA) to the corona-virus disease 2019 (COVID-19) as well as the observed and predicted impact it has had, and is likely to have, on the South African economy, specifically co-operative financial institutions (CFIs) and co-operative banks (co-op banks). The approach of the PA is supported by the Co-operative Banks Development Agency (CBDA).
The PA and the CBDA recognise that COVID-19 has had, and will have, an impact on the financial soundness of CFIs and co-op banks. The PA, nevertheless, expects that these institutions will continue to operate in a prudent, sound and socially responsible manner. To this end, this Communication outlines some of the temporary regulatory and supervisory actions that will be implemented by the PA to alleviate the stress caused by the COVID-19 pandemic on CFIs and co-op banks.
The PA and the CBDA will continue to engage with the financial co-operative sector as well as all other relevant stakeholders as further analysis on the impact of COVID-19 is conducted, and may issue further communication or implement additional actions in this regard.
This communication provides a revised and updated time frame to certain dates stipulated in the prior Joint Communication 2 of 2020 issued on 21 April 2020, given the recent developments and announcements by the President during this Covid-19 (Coronavirus) lockdown period.
The authors of this communication recognise that the Covid-19 pandemic continues to have an impact on the manner in which accountable institutions (AIs) operate, particularly in regard to their compliance with certain provisions of the Financial Intelligence Centre Act, 2001 (Act 38 of 2001). The authors are also cognisant that the pandemic may present criminals with further opportunities to engage in illicit or unlawful activity.
This communication sets out the supervisory body responses of the Prudential Authority, the National Payment System Department, the Financial Surveillance Department of the South African Reserve Bank, as well as the Financial Sector Conduct Authority (jointly referred to as the Authorities) having consulted the Financial Intelligence Centre (FIC) regarding the Covid‑19 pandemic. This response focuses on the observed and possible impact of the pandemic on South African accountable institutions (AIs) which are supervised by the Authorities. It also relates to ensuring the compliance of AIs with their legislative obligations in terms of the Financial Intelligence Centre Act, Act 38 of 2001 (the FIC Act).
The Authorities recognise that the Covid-19 pandemic may have an impact on the manner in which AIs operate, particularly in regard to their compliance with certain provisions of the FIC Act. The Authorities are also cognisant that the Covid-19 pandemic may present criminals with further opportunities to engage in illicit or unlawful activity.
This communication resonates with the statement published by the Financial Action Task Force (FATF) on 1 April 2020, which encourage governments to work with AIs and other businesses in support of Covid-19 aid and efforts to curtail the spread thereof, whilst remaining alert to new and emerging risks. The statement encouraged applying flexibility to the application of the FATF’s risk-based approach, and the fullest use of reliable digital customer on-boarding. Such an approach would accord well with the discretion and flexibility afforded to AIs as reflected in the customer due diligence obligations of the FIC Act.
The Authorities nevertheless expect that AIs continue to operate their businesses in a prudent and socially responsible manner in ensuring compliance with the FIC Act obligations. To this end, the communication further outlines some of the potential actions that can be taken by AIs to assist in achieving compliance with the FIC Act.
The Authorities implore AIs to act prudently whilst remaining cognisant of the role the financial sector plays within the broader South African economy, as well as their role in countering and mitigating money laundering, terrorist financing, and proliferation financing risk in this sector.
The Authorities may engage further with the affected AIs and all other relevant stakeholders during this time and may issue further communication or implement any additional measures as and when necessary as further analysis on the impact of Covid-19 is conducted.