Compliance

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Reflections on Current <strong>Compliance</strong>-Vetting Procedures at a Major South African Law Firm Ingo Porada, MMVIII Any accountable institution is aided in the adoption of such a striving for uniformity in procedures for FICA implementation by its own need to be able to identify and locate its clients, as well as to determine their solvency and professional credentials, et c., which to do, in the normal course of events, is good business practice in any event and therefore, in many cases, coincides with the obligatory aspects of the 'Know Your Customer' policy in terms of FICA. Other factors in the efforts of accountable institutions to operate a 'Know Your Customer' policy which addresses both their own need to establish the credentials of clients as well as their obligations in terms of FICA, are – respectively - considerations of diplomacy, client goodwill and public relations, in their interactions with individual clients, on the one hand, and the morale, comprehension and competence of support staff in its role of facilitating 'Know Your Customer' procedures on the other hand. * * * * * The mundane routines of ensuring 'FICA compliance' are conceptually classed into three key activities, namely verification, record-keeping and reporting, but in the everyday practice of implementation, only the first two of these activities feature prominently; the need to report any observations to the Financial Intelligence Centre arises only rarely. The image and experience of those FICA routines, both on the part of those who operate them and those who are at their receiving end, is generally a negative one. I. e.: - Clients of accountable institutions perceive the procedure of being made FICA compliant as petty, intrusive and irrelevant, and often – as to its purpose - as futile as well. - Support staff in accountable institutions who are tasked to ensure FICA compliance of clients experience their duties in that respect generally as tedious, irritating and embarrassing, as well as often as an unwarranted and implausible, or even incomprehensible, extra burden. - Professional staff in accountable institutions generally view their responsibilities in terms of FICA as a bureaucratic impediment to their proper work, an impediment – moreover – which as such encumbers and 'hamstrings' them with reputational and financial risks that are not obviously inherent in their services per se, but are, rather, a feature of an artificially imposed regulatory environment that is not attuned to commercial principles and economic imperatives, et c. * * * * * ii
Reflections on Current <strong>Compliance</strong>-Vetting Procedures at a Major South African Law Firm Ingo Porada, MMVIII The procedures which are in place at this major South African law firm for ensuring clients' FICA compliance, like comparable procedures in many other accountable institutions, are essentially inefficient. It is not only in an objective sense that FICA procedures are inefficient at this major South African law firm, as elsewhere, but they are also subjectively experienced as such by professionals and support staff, partly for the reason that they are considered to be additional and extraneous to the work which is the raison d’être of the firm, and that therefore there is no 'objective measure' of efficiency for FICA-related efforts – they are eo ipso an organisational liability. To change the way in which a necessary bureaucratic process is experienced is not only an organisational challenge, but it is also a psychological challenge. In order to identify possibilities for change, one has to analyse current procedures from both these perspectives. The 'ideal procedure' for ensuring FICA compliance of clients, as it is currently conceptualised at this major South African law firm, is that their credentials, in terms of the 'Know Your Customer' principles, are established at the first consultation. At that time, clients should be requested to complete a record form, and to present documents for photocopying in the firm's offices, and subsequent internal evaluation and filing, which suitably verify their individual or / and corporate credentials, including identities and addresses. The types of documents which satisfy these purposes, and the features which establish their validity, are relatively defined, both by law, and also by considerations of practicality, as not every bundle of documents which establishes client credentials can be analysed individually in terms of the complex exemptions and provisos that exist in the law. One important and plausible consideration of the firm in preferring this sequence of processes in the effort of ensuring clients' FICA compliance is that client cooperation in this procedure is partly dependent on the 'personal relationship' that exists between the advising attorney and client. The actual practice of ensuring clients' FICA compliance at this major South African law firm, however, deviates both in procedural detail and in the nature or quality of the 'personal relationship' from which goodwill for implementation of the 'Know Your Customer' policy is intended to be derived. Thus, as for the actual procedure that is mostly followed in the firm for ensuring clients' FICA compliance, it is in many cases neither simultaneous nor contextual with the first consultation. It is often the case, rather, that clients receive a request for FICA documentation from their advising attorney's secretary when the substantive work for the client is already in progress or even nearing its conclusion. At that time the incentive, for both the client and the advising attorney, to give consideration to a the need for complying with a requirement that is even at the most opportune moment already perceived as futile and vexatious 'red tape' is often already lost completely. With regard to the 'personal relationship' from which the clients' goodwill can supposedly be harnessed to cooperation in the FICA procedures, it is by no means the case that that goodwill can be counted upon in a sufficient number of iii
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Compliance

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