STANDARD BANK SUBMISSION

Protection of Constitutional Democracy Against Terrorist and Related Activities Bill B 12
- 2003 ("PROCDATRA") : Request to raise concerns at the Select Committee meeting to
be held on 27 October 2004

The Standard Bank of South Africa Limited (Standard Bank) would like to emphasise its support for the aims of the Department of Security and Constitutional Affairs as set out in PROCDATRA. We are mindful of the dangers and threats to the fabric of our society and national security that terrorism and related activities present. We also appreciate the effort that has been made by the many stakeholders to publish PROCDATRA in its current form.

We would like however, to raise some matters that have arisen after due consideration of PROCDATRA.

In this respect, we have previously endorsed the comments submitted by Prof Louis de Koker on behalf of Rand Afrikaans University's Centre for the Study of Economic Crime.

We have also recently been made aware that the Select Committee for the Department of Security and Constitutional Affairs is meeting on the 27'h October 2004 to discuss PROCDATRA. In the absence of an invitation to participate in the debate we offer the following for your consideration.

Our concerns are as follows: -

1. Definition of "knowledge"
The definition of "knowledge" as contained in clause 1(6) of PROCDATRA is of particular concern and, in its current form, will be difficult if not impossible to implement.

As the clause currently stands, a person will have knowledge of a fact if: -

- The person has actual knowledge of that fact (no concerns here)',

- The person fails to obtain information to confirm or refute the existence of that fact (for every transaction that a bank undertakes it would have to obtain information as to whether such transaction was terrorist financing or not. Failure to obtain such information would render the person concerned as having knowledge that the transaction involved terrorist financing); or

- The person believes that there is a reasonable possibility of that fact (this equates suspicion with knowledge)

We find it difficult to contemplate that the drafters of the Bill in fact intended this outcome. We therefore respectfully request that the above definition be replaced with the definition for "knowledge" as contained in the Prevention or Organised Crime Act No. 121 of 1998 ("POCA"), which definition is workable and effective.

2. Lack of consistency of definitions
As a general comment we would like to point out that it would be helpful if the definitions contained in PROCDATRA, POCA and the Financial Intelligence Centre Act No. 38 of 2001 ("FICA") were consistent.

3. Failure to incorporate a suitable defence for persons that report suspected terrorist activity to the Financial Intelligence Centre ("FIC")
According to the proposed amendments to Section 29 of FICA there will be a duty to report knowledge or suspicion of offences relating to the financing of terrorist and related activities to the FIC. This extends the current reporting requirement, which only pertains to knowledge or suspicions of money laundering offences.

However, it is noted that Section 7A of POCA contains a valid defence from prosecution for persons who report money laundering offences to the FIC. There does not appear to be a concomitant defence provided for as regards the reporting of terrorist financing offences to the FIC. This would potentially result in the ineffectiveness of the reporting requirement for terrorist financing as persons who either have knowledge or suspicion relating to terrorist financing may want to report in terms of the law but may be reluctant to do so for fear of prosecution. It is respectfully suggested that an appropriate defence clause be inserted.

4. Potential loss of anonymity in reporting terrorist financing
The law appears to contain a dual reporting obligation in terms of terrorist financing.Reporting is required both to the FIC (in terms of Section 29 of FICA) and to a police official (in terms of Section 12 of PROCDATRA).

While the identity of the person reporting the knowledge or suspicion of terrorist financing is protected in terms of FICA, there does not appear to be any similar protection of identity for the person who is required to report to the police official under PROCDATRA. This may result in an ineffective reporting obligation, as while the person may want to report in terms of PROCDATRA they may be reluctant to do so for fear of reprisal.

It is respectfully submitted that the dual reporting obligation be removed and that the sole reporting obligation for terrorist financing offences be to the FIC in terms of the proposed amendments to FICA. The FIC would then be responsible for communicating with law enforcement. The elimination of the dual reporting would also facilitate in synergising the reporting process.

5. Reporting of transactions that are "unnecessarily complex" or transactions that "form part of an unusual pattern of transactions"
These additional reporting requirements as contained in the proposed amendments to Section 29 of FICA are potentially going to be very difficult to implement practically, and to train staff to identify. Transactions may be complex for a number of reasons, most of which may well be legitimate. In the absence of a clear definition of what an "unnecessarily complex transaction" is, it will be problematic, if not impossible to
implement.

It is unclear as to how the identification and reporting of "unnecessarily complex" transactions and those that "form part of an unusual pattern of transactions" will assist in the combating of terrorist financing. It is furthermore submitted that the current wording of Section 29 of FICA sufficiently provides for the detection and
reporting of suspicious activity.

We respectfully recommend that these additional reporting requirements be removed from the proposed amendments to FICA.

6. No provision for the continuation of transactions when terrorist financing is suspected
It is noted that PROCDATRA makes no provision for the continuation of a transaction in the event of terrorist financing being suspected. This would result in a person having to terminate any transaction where there was a suspicion of terrorist financing activity. The consequences of this action would potentially be two-fold: -

- A client guilty of terrorist financing could be inadvertently tipped off and as a result take evasive action; alternatively

- A potentially innocent client could be severely prejudiced on the basis of a mere suspicion.

It is respectfully suggested that a clause be inserted into PROCDATRA that will provide for the continuation of a transaction where there is a suspicion of terrorist financing provided that a subsequent report is filed with the FIC.

We trust that our concerns will be received in the constructive spirit intended, and we would welcome the opportunity to discuss our suggestions with your Department when convenient to yourselves.

Yours faithfully

P L van der Merwe
Senior Manager, Group Compliance