FICA vs POPIA: Navigating South Africa’s KYC compliance regulation

Regulatory compliance is critical to business globally, especially for financial and other accountable institutions. Local Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) regulations keep financial institutions and other accountable organisations in check, ensuring their products and services are not used to facilitate money laundering and terrorism financing activities.

AML/CFT regulations do not work in isolation and sometimes overlap or conflict with other regulations. For example, Know Your Customer Requirements (KYC) are crucial to AML/CFT efforts and require processing customers' data. The processing of customer data, in turn, means institutions are also governed by data protection regulations where they exist.

South Africa is a prime example of where these regulatory overlaps can confuse companies looking to stay on the right side of KYC regulations. KYC in South Africa is governed by the Financial Intelligence Centre Act (FICA), enforced by the Financial Intelligence Centre (FIC).

FICA requires financial institutions and other accountable businesses in South Africa to verify the identity of their clients and assess their risk profile. It also requires businesses to maintain accurate records of transactions, monitor their clients' activities for signs of suspicious behaviour, and report any suspicious transactions to the FIC. FICA was first enacted in 2001 and has been amended four times (2008, 2017, 2020, and 2022).

In 2013, the South African government enacted the Protection of Personal Information Act (POPIA) to protect the privacy of personal information. POPIA imposes obligations on businesses that collect, process, store, or share personal information to ensure that they do so lawfully and transparently. It requires businesses to obtain consent from individuals before collecting their personal information, to keep the information secure, and to notify individuals if their information is compromised in a data breach.

Regulatory overlap between FICA and POPIA

Compliance with FICA and POPIA is important for accountable institutions looking to operate in South Africa. Overall, FICA and POPIA are complementary acts. Both regulations require institutions to perform customer due diligence, maintain customer information records, and implement measures to protect personal information against loss, damage, or unauthorised access.

However, there are instances where concurrent compliance with both laws might be difficult. One such instance is the reporting or investigation of suspicious transactions. POPIA generally prohibits the disclosure of personal information without the data subject's consent. This can be tricky for financial institutions, which FICA requires to disclose personal information to the FIC when reporting suspicious transactions. Institutions may also need to share this information with partner institutions and other regulators in cases of widespread fraud.

Another instance of potential conflict is that tenure institutions can retain personal information. POPIA typically limits the retention of personal information to the minim amount of time necessary for the purpose for which it was collected. On the other hand, FICA requires accountable institutions to customer transaction data for up to 5 years after the customer stops transacting.

How to Approach KYC Compliance in South Africa While Staying on the Sides of Both FICA and POPIA

Navigating KYC compliance regulation in South Africa can be complex, particularly when dealing with multiple regulations such as FICA and POPIA. However, by understanding the requirements of both regulations and adopting a risk-based approach to KYC compliance, companies can ensure that they meet their obligations under FICA and POPIA. By doing so, they can safeguard themselves against penalties and reputational damage while promoting transparency and accountability in their business operations.

Smile Identity offers the best-in-market solution for businesses onboarding users, verifying identity, and performing KYC, KYB, and AML checks in South Africa.

The Smile ID team has compiled a comprehensive South Africa KYC guide covering regulations, market ID types, and best practices for seamlessly verifying users in South Africa. Download the full guide here and start building a KYC journey tailored for your South African customers.

Or talk to our team about your South African operations, and we can help advise based on your business's specific requirements.