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Financial Intelligence Centre Act, 2001 (Act No. 38 of 2001)


Guidance Note 4 on Suspicious Transaction Reporting

Part 3 - What is the Nature of a Suspicion?


3.1 In addition to circumstances where a person has actual knowledge, the reporting obligation under section 29 of the FIC Act also applies in circumstances where a mere suspicion may exist. The FIG Act does not define what constitutes a suspicion. The ordinary meaning of this term includes state of mind of someone who has an impression of the existence or presence of something or who believes something without adequate proof, or the notion of a feeling that something is possible or probable. This implies an absence of proof that a fact exists.


3.2 This interpretation of the term "suspicion" was also applied in South African case law: In Powell NO and others v Van dar Merwe NO and Others 2005 (5) South Africa 62 (SCA) the Supreme Court of Appeal confirmed that South African courts have endorsed the following interpretation of the term used by Lord Develin in the English case of Shabaan Bin Hussein and Others v Chong Fook Kam and Another [1970] AC 942 (PC) ([1969] 3 All ER 1627) at 948B:


Suspicion in its ordinary meaning is a state of conjecture or surmise where proof is lacking; "I suspect but I cannot prove".


3.3 With this in mind the starting point to considering whether circumstances give rise to a suspicion would be when those circumstances raise questions or gives rise to discomfort, apprehension or mistrust.


3.4 A suspicious state of mind is subjective, which means that a court would have to draw inferences concerning a person's state of mind in relation to a particular set of circumstances from the evidence at its disposal concerning those circumstances. However, the FIC Act adds an element of objectivity to this with the phrase "ought reasonably to have known or suspected" in section 29(1). The application of this phrase is explained in section 1(3) of the FIC Act. Section 1(3) of the POCA provides that a person ought reasonably to have known or suspected a fact if a reasonably diligent and vigilant person with the same knowledge, skill, training and experience, as well as the knowledge, skill, training and experience that may reasonably be expected of a person in the same position, would have known or suspected that fact. This expands the scope of the obligation to identify circumstances which may indicate that a set of circumstances concerning a business, or the transactions involving the business, is of a suspicious nature.


3.5 When considering whether there is reason to be suspicious of a particular situation one should assess all the known circumstances relating to that situation. This includes the normal business practices and systems within the industry where the situation arises.


3.6 A suspicious situation may involve several factors that may on their own seem insignificant, but, taken together, may raise suspicion concerning that situation. The context, in which a situation arises, therefore, is a significant factor in assessing suspicion. This will vary from business to business and from one customer to another.


3.7 A person to whom section 29 of the FIC Act applies, should evaluate matters concerning the business in question and transactions involving the business, in relation to what seems appropriate and is within normal practices in the particular line of business of that person, and bring to bear on these factors such as the knowledge the person may have of the customer. This should involve an application of person's knowledge of the customer's business, financial history, background and behaviour.


3.8 A particular category of transactions that are reportable under section 29(1) of the FIC Act is transactions which a person knows or suspects to have no apparent business or lawful purpose. This refers to situations where customers enter into transactions that appear unusual in a business context or where it is not clear that purpose of the transaction(s) is lawful. In order to identify situations where customers wish to engage in these unusual transactions a person would have to have some background information as to the purpose of a transaction and evaluate this against several factors such as the size and complexity of the transaction as well as the person's knowledge of the customer's business, financial history, background and behaviour.


3.9 In Part 4 of this Guidance Note more information is given as to factors that may indicate that a transaction is suspicious in a money laundering and terrorist financing context, respectively. These are indicators as to circumstances that may give rise to a suspicious state of mind or may be indicative of the fact that a reasonably diligent and vigilant person may have become suspicious of a particular transaction or series of transactions.