South African attorneys and legal practitioners are accountable institutions under FICA when they provide certain categories of service. The legal profession is considered a high-risk sector for money laundering because lawyers handle large sums of client money, assist with complex transactions, and are bound by professional confidentiality obligations that can complicate AML compliance. This guide explains which legal services trigger FICA obligations and what is required.
Which Legal Services Trigger FICA Obligations?
Schedule 1 of FICA includes legal practitioners who provide the following services as a regular feature of their business:
- Buying and selling of immovable property on behalf of a client
- Managing client money, securities, or other assets
- Management of bank, savings, or securities accounts
- Organisation of contributions for the creation, operation, or management of companies
- Creation, operation, or management of legal persons or arrangements, and buying and selling of business entities
Conveyancing is the most common triggering service for South African attorneys. Any attorney who handles the transfer of immovable property is an accountable institution for that service.
CDD for Legal Clients
When a lawyer provides a triggering service, they must conduct Customer Due Diligence (CDD) on the client. This includes verifying the client's identity, identifying the beneficial owners of any legal entity client, and understanding the nature and purpose of the service being provided.
In conveyancing, lawyers must verify the identity of both the seller and the buyer, and must understand the source of funds for the purchase price. If the purchase price is being paid in cash or from an unusual source, the lawyer must investigate and may need to file a Suspicious Transaction Report (STR).
Legal Professional Privilege and FICA
Legal professional privilege (also called attorney-client privilege) protects confidential communications between a lawyer and their client. FICA recognises this privilege: a lawyer is not required to disclose information that is subject to legal professional privilege when filing an STR. However, the privilege does not exempt lawyers from their KYC obligations — it only protects the content of privileged communications, not the fact that a transaction occurred.
Frequently Asked Questions
- Does a South African attorney need to conduct KYC for all clients?
- Only for clients to whom the attorney provides a triggering service listed in Schedule 1 of FICA. Standard legal advice and litigation services do not trigger accountable institution status.
- Must a conveyancer verify the identity of the buyer and the seller?
- Yes. A conveyancer must verify the identity of both parties to the transaction, including the identity of all beneficial owners of any corporate party.
- Can a lawyer refuse to act for a client who will not provide KYC documents?
- Yes. Under FICA Section 21(3), a lawyer must not provide a triggering service if the client refuses to provide the required identification information. The refusal may itself be suspicious and should be considered in the context of an STR.
- Does legal professional privilege prevent a lawyer from filing an STR?
- No. Legal professional privilege protects the content of privileged communications, but it does not prevent a lawyer from filing an STR about a suspicious transaction. The lawyer should obtain legal advice if they are uncertain about the scope of the privilege in a specific case.
- What records must a lawyer keep for KYC purposes?
- Under FICA Section 22, lawyers must keep records of all customer identification documents and transaction records for a minimum of five years after the end of the business relationship.
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