We have previously written on the screening of employees to mitigate financial crimes. These screening requirements come as a result of Directive 8 and the Public Compliance Communication ("PCC 55") published by the Financial Intelligence Centre ("FIC"). These make it compulsory for employers that are accountable institutions to periodically screen employees for competence and integrity, as well as to scrutinise employee information against the targeted financial sanctions lists, in order to identify, assess, monitor, mitigate and manage the risk of money laundering, terrorist financing and proliferation financing.
Directive 8 and PCC 55 state that the screening of employees should be done in compliance with labour laws. Some of the important labour law factors that an employer will have to grapple with in complying with Directive 8 and PCC 55 include:
- ensuring that the screening does not unfairly discriminate against employees;
- what action to take if the screening reveals adverse findings; and
- following a fair procedure if the screening reveals adverse findings.
Protection against unfair discrimination
Employees and applicants for employment are protected from unfair discrimination by the Employment Equity Act, 1998 ("EEA"). This prohibits direct or indirect unfair discrimination in any employment policy or practice based on any listed or arbitrary ground. However, it is not unfair discrimination to distinguish, exclude or prefer any person based on the inherent requirements of the job.
PCC 55 guides employers on how to screen employees' competence. This can be done by screening an employee's previous employment history, references, qualifications and relevant accreditations. In doing so, an employer must keep in mind that, in terms of the EEA, a person may be suitably qualified for a job through formal qualification; prior learning; relevant experience; or capacity to, within a reasonable time, acquire the ability to perform the job (if a person would not be able to acquire the ability to perform the job without a formal qualification, such a condition would be justifiable).
On this note, employers must not underestimate the importance of screening whether employees are indeed in possession of the qualifications and accreditations they claim to have. An example of how important this is was demonstrated in the Labour Court decision in LTE Consulting (Pty) Ltd v CCMA and Others, where the employer discovered that its financial manager who had claimed to hold certain qualifications, and to be a chartered accountant, was in fact not a chartered accountant, and did not hold any of the qualifications he had claimed. The employee was dismissed and the dismissal was upheld by the Labour Court.
If an employer utilises psychological or similar assessments in screening employees, it must ensure that the assessments utilised have been scientifically shown to be valid and reliable, can be fairly applied to employees and are not biased against any employee or group.
PCC 55 also guides employers on how to screen employees for integrity. This may be done by conducting criminal history checks for dishonesty or financial crimes. In order not to fall foul of the EEA, employers must be able to justify disqualifying an employee or applicant for a job due to a criminal record, by considering factors such as the nature of the crime, its relevance to the job, time since conviction, evidence of rehabilitation, the circumstances under which the crime was committed, the requirements of the job, and the nature of the employer's business.
Where an employer has required an employee to disclose whether they have a criminal record and they are dishonest, the employer is not without recourse. In G4S Secure Solutions (SA) (Pty) Ltd v Ruggiero N.O. and Others, when applying for a position, the employee was asked: "Have you ever been convicted of a criminal offence?" The employee indicated that he had not. Fourteen years later, when applying for promotion, the employer conducted a criminal record check and found that the employee had indeed been convicted of a criminal offence. The employer dismissed the employee. The case came before the Labour Appeal Court, which upheld the employer's decision to dismiss the employee and held that the misrepresentation made by the employee was blatantly dishonest, and that the employer was entitled, as an operational imperative, to rely on honesty and full disclosure by its employees.
This case underscores the importance for employers to continually screen employees, as per Directive 8 and PCC 5, and not just at the start of employment. Continuous screening can uncover missed information during recruitment or undisclosed conduct and information during the course of an employee's employment.
An accountable institution must make a risk-based decision based on the outcome of the screening process to mitigate and manage the risk of financial crimes that may arise within its institution. The nature of the decision taken will vary according to each institution based on an assessment of the operational risk, the level of exposure it creates and the position occupied by the employee.
When taking action against an employee, employers must respect an employee's right to fair treatment and guard against unfair dismissal. To do this, employers must ensure a fair process, by allowing the employee an opportunity to be heard before making a decision. An employer may mitigate risk in various ways, like suspending the employee as a precaution pending investigation or taking disciplinary action if there is evidence of misconduct.
In Nogcantsi v Mnquma Local Municipality and others, the employee's contract of employment stated that the job offer was subject to a "vetting and screening process" and that the contract would automatically terminate if the outcome of the screening process was negative. The screening revealed that the employee had a pending criminal case for defeating the ends of justice and attempted murder. The Labour Appeal Court found that a negative outcome to the screening process was material to the candidate's suitability for the role (that of Close Protection Officer) and that the automatic termination of employment was permissible in terms of law.
It is important, however, to note that there may be circumstances where the adverse findings in respect of an employee do not necessarily constitute misconduct within the employer's workplace. As an example, PCC 55 provides that employers must implement additional screening measures in respect of positions that pose a higher risk, such as screening for whether an employee is a national of a high-risk terrorist financing or proliferation financing geographic area. In these circumstances, an employer may assess whether the finding renders the employee incapable of performing their job, or whether the operational requirements of the employer require the dismissal of such an employee. Again, in conducting these assessments, employers must ensure that they do not unfairly discriminate against employees based on any of the listed or arbitrary grounds in terms of the EEA and that they follow a fair process.
To comply with Directive 8 and PCC 55, employers need to review their recruitment processes, employment contracts, and their policies and procedures to assess whether they comply with the requirements of Directive 8 and PCC 55. Directive 8 and PCC 55 set the minimum standard for screening for competence and integrity. Where an employer already applies a higher standard than what is required, the FIC encourages them to continue applying that higher standard.
The provisions of the Protection of Personal Information Act also apply when screening employees in terms of Directive 8 and PCC55.
There are many other considerations that employers must take into account when applying the screening requirements of Directive 8 and PCC 55, and it is advisable that employers seek legal advice before taking any action.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.