Finance minister Enoch Godongwana has amended the Schedules in the Financial Intelligence Centre Act (FICA). The amendments to Schedules 1, 2, and 3 of FICA will come into effect from 19 December 2022. This comes after a long consultation process which began when National Treasury initially published the proposed amendments on 19 June 2020; since then and where relevant, comments provided by the various sectors were taken into consideration and the amendments were re-drafted.
Will your business need to comply with FICA from 19 December 2022?
All new entities and business activities that fall within the amended, widened scope of Schedule 1 must comply with the applicable FICA requirements as an accountable institution, effective 19 December 2022.
Schedule 1 – Accountable Institutions
Schedule 1 contains a list of entities that are classified as accountable institutions. Below we take a closer look at the amendments made to the list of accountable institutions.
New Accountable Institutions
The amendments significantly increase the number of sectors included in Schedule 1. The following new sectors or business activity have been added to the list of accountable institutions and will need to comply with the requirements of FICA:
- Company Service Providers
- Co-operative Banks
- High Value Goods Dealers
- The South African Mint Company
- Crypto Asset Service Providers
- Payment clearing service operators
The inclusion of these sectors as accountable institutions will align South Africa’s anti-money laundering, combating the financing of terrorism and countering proliferation financing AML/CFT/CPF framework more closely with standards set by the Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog. FATF, of which South Africa is a member, sets international standards and measures for combating money laundering (ML), terrorist financing (TF) and proliferation financing (PF).
Widening the scope
Some of the changes to Schedule 1 were technical amendments that sought to take into account and align to new legislation, while other amendments relate to widening the scope of activities of businesses that will fall under FICA. Amendments to widen the scope of items under Schedule 1 also ensure alignment with the FATF standards. These changes to Schedule 1 include:
- Legal Practitioners – technical amendment to replace the repealed Attorneys Act with the Legal Practice Act. Clarity provided that Attorneys (including a conveyancer or notary) and Advocates (dealing directly with the public) are included as accountable institutions.
- Trust service providers – Anyone that provides trust services such as creating a trust arrangement, preparing for or carrying out transactions (including as a trustee) related to the investment, safe keeping, control, or administering of trust property is an accountable institution.
- Authorised user of an exchange – technical amendment to replace the repealed Securities Services Act with the Financial Markets Act.
- Long Term Insurance business – this has now been changed to “life insurance business” as defined in the Insurance Act, 2017, but excludes reinsurance business. Technical amendment to align to the Insurance Act and remove the reference to the Long-term Insurance Act.
- Credit providers – This now includes credit providers as defined in the National Credit Act, and anyone who carries on the business of providing credit in terms of any credit agreement that is excluded from the National Credit Act by virtue of section 4(1)(a) or (b) of that Act.
- Financial Services Providers – Any FSP requiring to be authorised under the FAIS Act to render financial services (advice or intermediary services) in respect of the investment of any financial product (but excluding a non-life insurance policy, reinsurance business as defined in the Insurance Act 2017, and the business of a medical scheme as defined in the Medical Schemes Act 1998), is regarded as an accountable institution.
- The South African Postbank Limited – technical amendment to replace Postal Services Act 1998 with South African Postbank Act 2010.
- The reference to the Ithala Development Finance Corporation Limited as its own item under Schedule 1 has been deleted. This is a consequential amendment as this business is now covered in the amended scope of Credit Providers and will therefore remain an accountable institution under that item.
- Money remitter – this has now been changed to money or value transfer providers, which also includes informal money remitters.
No changes to these accountable institutions
The following accountable institutions remain on the list of Schedule 1 without any changes, and therefore the requirement to comply with FICA remains in place:
- Estate Agents
- A person who carries on the “business of a bank” as defined in the Banks Act, 1990
- A mutual bank as defined in the Mutual Banks Act, 1993
- A person who carries on the business of making available a gambling activity in respect of which a license is required to be issued by the National Gambling Board or a provincial licensing authority.
- A person who carries on the business of dealing in foreign exchange
- A person who issues, sells or redeems travellers’ cheques, money orders or similar instruments.
Schedule 2 – Supervisory Bodies
The amendments also change the list of supervisory bodies and will bring about changes to the supervisory body structure. The amendments relate to aligning to new legislation such as replacing the Financial Services Board (FSB) with the Financial Sector Conduct Authority (FSCA). The amendments have also included the Prudential Authority as a supervisor body and removed from the list of supervisory bodies – the Independent Regulator Board for Auditors, the National Gambling Board and the Law Societies.
The FIC will oversee and enforce FICA risk and compliance adherence among non-financial sectors including:
- Trust and company service providers
- Legal practitioners
- High-value goods dealers
- The South African Mint Company
- Crypto asset service providers
- Credit providers
Schedule 3 – Reporting Institutions removed
Schedule 3 had previously contained a list of reporting institutions, these were motor vehicle dealers and Kruger rand dealers. The amendments have deleted Schedule 3 and there are no longer any reporting institutions listed.
The items under Schedule 3 have been removed as a consequence of the inclusion of high-value goods dealers as a category of accountable institutions in Schedule 1. Certain entities that fall under these two categories of reporting institutions (motor vehicle dealers and Kruger rand dealers) will now be included in the new category of high-value goods dealers in Schedule 1 of FICA i.e. they will now be regarded as accountable institutions. High-value goods dealers include businesses dealing in high-value goods receiving payments in any form of R100 000 or more per item, whether payment is made in a single transaction or more transactions.
FICA Compliance obligations
Similar to existing accountable institutions, all new Schedule 1 accountable institutions, will be required to fulfil FICA risk and compliance obligations. These include (amongst other things):
- Registering with the FIC as an accountable institution
- Maintaining and implementing a risk management and compliance programme (RMCP)
- Implementing customer identification, verification and other customer due diligence measures
- Appointing a compliance officer
- Training employees on FICA compliance, ML/TF/PF risk exposure, and on the institution’s RMCP
- Undertaking business risk assessments for ML/TF/PF
- File regulatory reports relating to suspicious and unusual transactions, cash transactions exceeding the prescribed threshold and on property that is linked to sanctioned persons, terrorist activity or terrorist organisations.
Transitional supervisory approach – no expected fines
In a media release the FIC stated that in the first 18 months from the date of commencement of the amendments, the FIC and supervisory bodies will focus on entrenching the FICA risk and compliance provisions and implementation among the new sectors in Schedule 1. Supervisory bodies will conduct inspections and, where warranted, issue remedial administrative sanctions, based on a risk-based approach, to correct identified areas of non-compliance. In respect of the new sectors, the FIC and supervisory bodies do not envisage issuing financial penalties for non-compliance with FICA during the transitional 18-month period.