WHY ARE FINANCIAL INSTITUTIONS SO INSISTENT ON KYC AND AML/CFT/ CPF COMPLIANCE?

Namibia Financial Institutions
Supervisory Authority
(“NAMFISA”) is the designated
Anti-Money Laundering
(“AML”), Combatting Financing of
Terrorism (“CFT”) and Combatting
Proliferation Financing (“CPF”) supervisory
body (Authority) for accountable institutions
(“AIs”) and reporting institutions (“RIs”)
under its jurisdiction in terms of sec 35 of
the Financial Intelligence Act, No. 13 of 2012
(“FIA”) read with the NAMFISA Act, No.
3 of 2001. The following sectors are AIs and
RIs: capital markets, collective investment
schemes, micro lenders and insurers.

In terms of sec 35 (2) of FIA, NAMFISA supervises,
monitors and enforces compliance by AIs and RIs with
FIA. Any reference to FIA in this article shall include
all subordinate legislations such as regulations, orders,
circulars, notices, determinations and directives issued
under FIA.
This article discusses the consequences that AI’s and RI’s
face if they fail to comply with FIA and the international
standards. For purposes of this article, the AIs and RIs will
be jointly referred to as the financial institutions.
International framework
The Financial Action Task Force (“FATF), the international
standard setting body for AML/CFT/CPF
compliance, recommends that countries should ensure
that there is a range of effective, fair and discouraging
penalties available to deal with AI’s and RI’s that fail
to comply with the AML/CFT/CPF requirements. In
addition, FATF recommends that penalties should be
applicable not only to financial institutions but also to
their directors and senior management.
KYC and AML/CFT/CPF
Compliance
KYC (Know Your Customer) and AML/CFT/CPF
compliance are statutory tools which are intended
to prevent and/or detect money laundering / financing
of terrorism / proliferation financing activities.
KYC is the foundation for combating all forms of
financial crimes. As such the law requires financial
institutions to implement KYC and have effective
AML/CFT/CPF compliance. In order to achieve the
above, financial institutions insist that a customer
provide certain documentation before establishing a
transaction or relationship.
Failure to implement KYC and AML/CFT/CPF
compliance has serious consequences not only on the
financial institution itself but also on the international
standing of Namibia. Financial institutions risks
receiving heavy penalties. The non-compliance has
far-reaching consequences on the country that
include being categorised as a higher risk country
thus reducing investors’ confidence in the economy
which consequently undermines the economic
growth and compromises the national financial system.
Therefore, compliance with the KYC and AML/CFT/
CPF is in the interests of all, thus it requires joint
cooperation and effort from financial institutions,
customers and supervisory bodies.
Offences and Penalties in
terms of FIA
Any person responsible for financial institutions or
an institution convicted of any offence in terms of
FIA, may incur a maximum fine of N$100 million
and 30 years maximum imprisonment or both the
fine and the imprisonment.
The offences created by the FIA can be grouped in
5 groups, namely:
(i)Administrative related: these are offences related
to the identification of clients, procedures to follow
when dealing with clients identified as high risk
clients, on going and enhanced due diligence, cross
border correspondent transactions, the conduct of risk
assessments and the formulation and implementation
of internal rules to combat AML/CFT/CPF.
(ii)Records related: these are offences related to the
destruction or tampering of any records kept; record keeping;
failure to give assistance to the Financial Intelligence
Centre (“FIC”) to access the records kept; failure to declare
cross border movement of cash and bearer negotiable
instruments above the prescribed limits; and failure to
electronically register declared cross border movement of
cash and bearer negotiable instruments.
(iii)Reporting related: these are offences related to
reporting cash transactions above prescribed limits, reporting
suspicious or unusual transactions to the FIC;
and reporting of conveyance of cash in excess to the
prescribed limits into or out of Namibia.
(iv)Disclosure related: these are offences related to
tipping off; misusing and disclosure of confidential
information.
(v)Directives / order related: these are offences related
to failure to comply with a directive, monitoring
order, obstruction hindrance or threatening NAMFISA
officials or agents in performance of their functions.
In addition, failure by financial institutions to submit
requested reports to NAMFISA regarding the
institution’s compliance with FIA is a criminal offence,
if found guilty, a fine of up to N$10 million or 10 years
imprisonment, or both the fine and the imprisonment
may be imposed.
It should be noted that penalties under FIA are not
only limited to persons responsible for such financial
institutions but also applicable to supervisory bodies
like NAMFISA in the event they fail to execute their

mandate. A administrative fine not exceeding N$10
million or imprisonment term of not more than 10
years may be imposed on the supervisory body.
Alternative measures before
imposition of penalties
Before resorting to criminal action NAMFISA may
explore other alternatives to ensure compliance with
FIA. FIA makes provision for the following alternative
compliance enforcement measures:
1. Directives
Here NAMFISA directs the institution/s involved to provide
certain information / documents or reports; cease or
refrain from specified omission or commission which
contravenes FIA; take correction action; or perform acts
necessary to meet obligations imposed by FIA.
2. Administrative penalties
NAMFISA may, after consulting the FIC impose one
or more of the following administrative penalties on
institution or person namely: (i) a caution not to repeat the;
(ii) a formal expression of disapproval, (iii) a directive to
take corrective action or make specific arrangements; (iv)
the restriction or suspension of certain identified business
activities; (v) suspension of licence to carry on business;
or (vi) a financial penalty not exceeding N$10 million.
3. Application to court
NAMFISA may institute legal proceedings against a
financial institution or a person, after consulting the
FIC, to: (i) discharge any obligations imposed by the
FIC or supervisory body; (ii) compel the institution or
person to comply with FIA; (iii) cease contravening FIA;
(iv) compel the institution or person to comply with a directive;
or (v) obtain declaratory order on any point of law
relating to FIA.
In conclusion, non-compliance with the provisions of
FIA by financial institutions or persons in control of
such institutions can lead to a damaged national reputation,
threaten the good functioning of our financial system
and dampen foreign direct investment. Compliance with
FIA should be an objective of all stakeholders. In order to
maintain a good reputation, ensure that Namibia remains
an investment place of choice and ensure that potential
money launders are excluded from the financial system,
financial institutions insist on KYC and AML/CFT/CPF
compliance. For more info on the AML/CFT/CPF legislations,
please visit our website: www.NAMFISA.com

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