Financial Intelligence Centre Act, 2001 (Act No. 38 of 2001)
Guidance Note 3
Guidance for Banks on Customer Identification and Verification and Related Matters
30. Clarification of the difference between Exemptions 5 and 16 - identifying a bank or a client of a foreign country or institution
In terms of Exemption 16 of the Exemptions, a bank in South Africa is exempted from having to identify a bank in another country when the anti money laundering regulation and supervision that applies to that foreign bank is to the satisfaction of the supervisory body. This exemption applies in the case of transactions between the two banks and not to transactions of the underlying clients of the foreign bank.
Exemption 5 of the Exemptions relates to the underlying clients of a foreign institution, such as a bank. This exemption exempts a bank in South Africa from the verification of a foreign client's identity in cases when a regulated institution in the relevant country can verify that client's identity. The South African bank still has to establish the client's identity, but can rely on the verification undertaken by the foreign institution. The conditions to exemption 5 are that the institution providing the verification of the client's identity must be subject to antimony laundering regulation and supervision to a standard that meets the satisfaction of the relevant supervisory body. The foreign institution should forward all documents relative to the verification of the client's identity to the South African bank, in due course.
Both of these exemptions require an indication from the appropriate supervisory body as to which countries it considers to be applying satisfactory anti money laundering regulation and supervision to the relevant institutions. In the absence of such an indication, the best practice is to use the FATF issued list of non-cooperative countries and territories ("the NCCT") as an indication of jurisdictions that lack the intent to apply AML and CFT procedures. Extreme caution should be applied in transactions with these black listed jurisdictions. It would also be acceptable for supervisors and accountable institutions to regard those countries, which are actual FATF member countries, as being jurisdictions applying adequate AML and CFT procedures.