FICA REQUIREMENTS WITHIN THE PROPERTY INDUSTRY

The Financial Intelligence Centre Act 38 of 2001 (“the Act”) was introduced into the South African statute books in 2003. Initially, the compliance requirements of the Act were treated with frustration and seen as a burden on consumers. Today, most consumers in the property sector in South Africa are familiar with, and adhere to the requirements of, the Act, in particular, providing proof of identity, proof of residence, confirming marital status and banking details to accountable institutions such as attorneys, financial institutions and property practitioners.

The Financial Intelligence Centre (“FIC”) and the Money Laundering Advisory Council was established and is regulated by the Act. The FIC imposes various administrative duties and reporting obligations on designated accountable institutions, identified as a possible risk where money laundering might take place, such as financial institutions, property practitioners, attorneys and retail centres.

The Act sets South Africa in line / on par with similar international laws and legislation designed and implemented to combat money laundering, tax evasion and the financing of terrorist activities associated with money laundering through the process of identifying proceeds from illegal activities.

In addition to the Act, there is other legislation which aims to combat money laundering in South Africa including:

• The Prevention of Organised Crime Act, 121 of 1998 which provides measures to combat organised crime, money laundering and related criminal activities. This act places a reporting duty on designated institutions and their employees to report certain information.
• The Protection of Constitutional Democracy Against Terrorist and Related Activities Act, 33 of 2004 provides measures to prevent and combat terrorist and related activities and offences associated with money laundering. This act also gives effect to international instruments to be utilised to combat terrorist and related activities.

There are 4 broad categories of compliance as set out in the Act:

1. The requirement of KYC (know your client), where the obligation rests on accountable institutions and their employees to verify and establish certain information about a client prior to establishing a business relationship.
2. The duty to keep records. Accountable institutions and their employees are obligated to keep records of all business relationships for a period of 5 years from the date the business relationship (transaction) is concluded. Records may be kept in electronic format or hard copies.
3. The duty to report certain transactions, being those that exceed certain cash thresholds (i.e. for cash amounts larger than R49 999.99) and suspicious/unusual transactions / business relationships. However, merely because a transaction is out of the norm and does not follow normal procedures, does not necessarily make it a suspicious transaction to be reported.
4. The duty to train employees of accountable institutions. Every accountable institution is obligated to appoint a compliance officer, to ensure compliance of the requirements of the Act by the institution and its employees. The compliance officer is also required to train the employees of the institution on the requirements as set out by the Act.

The Act provides for onerous penalties for non-compliance with the Act, including imprisonment and/or a fine for offences such as: failure to identify persons; failure to keep records; destroying or tampering with records; failure to give assistance and failure to advise the FIC or client.

Compliance with the Act (together with other anti-corruption, anti-money laundering and terrorist combatting legislation) is essential in the prevention of corruption, money laundering and terrorist activity, especially with South Africa in the throes of international greylisting, and desperately in need of foreign investment. Money laundering poses a considerable risk to the country’s stability and soundness of its financial systems, by eroding confidence in the financial markets and institutions, and has a negative impact on economic growth.