The Financial Intelligence Centre (FIC) has the authority to reprimand institutions and can also impose penalties on institutions when they do not comply with regulation. If the FIC or a supervisory body finds that an accountable or reporting institution or any person with an obligation to comply with the Financial Intelligence Centre Act (Act) has not complied with the Act or with a directive issued in terms of the Act, an administrative sanction may be imposed. The sanction will generally be imposed by the supervisory body who has conducted the inspection.
Administrative sanctions may take a variety of forms – including, a caution, a reprimand and/or restricting the business activities of the institution and/or a financial penalty of up to R10 million for a natural person or up to R50 million for a legal person per instance of non-compliance.
Cases of administrative sanctions imposed on FSPs
The FIC recently published notices to motor dealerships for not complying with the regulations.
Registration with the FIC is a legal requirement applying to all accountable and reporting institutions – listed in Schedules 1 and 3 of the FIC Act, respectively. All registrations must be completed and submitted to the FIC electronically within the prescribed period using the goAML registration system. Persons who commence new businesses which are regarded as accountable or reporting institutions are required to register with the Centre within 90 days from the date the business commenced.
In terms of Section 45 of the Act, the FIC reprimanded JDG Trading (Pty) Ltd t/a Nissan Mthata, European Automotive Imports of South Africa (Pty) Ltd t/a Maserati, SMG Auto Cape Town (Pty) Ltd, Mystic Cars (Pty) Ltd as well as Gold Trader Mossel Bay (Pty) for failing to timeously register with the Centre.
Nissan Mthatha was also reprimanded for utilising the user profile of another institution to submit a report to the Centre. Directive 2 clearly stipulates that the login credentials obtained from the FIC may only be used by the person to whom such credentials have been allocated.
The FIC also reprimanded these businesses for failing to report in terms of Section 28 of the Act, which refers to the obligation of the accountable or reporting institution to report transactions where cash in excess of the prescribed amount, was paid or received. This means that all cash transactions exceeding R24 999.99 (being R25 000 or more) must be reported to the Centre in terms of Section 28 of the Act. An accountable or reporting institution that does not report a cash transaction as required, is guilty of an offence where the penalty may be imprisonment up to 15 years or a fine up to R100 million.
The Centre imposed the following penalties for failing to report on transactions that exceeded the threshold amount:
- Maserati: R176,000.00 for 12 cash transactions
- Gold Trader: R8,120.00 for 3 cash transactions
- Nissan Mthata: R60 000.00 for 4 cash transactions
- Mystic Cars: R180,000.00 for 19 cash transactions
- SMG Auto: R1, 600, 000.00 for 173 cash transactions
Financial penalties imposed by the FIC or supervisory body are paid into the National Revenue Fund Account. The money is used to provide financial assistance to law enforcement agencies or institutions that render assistance to victims of crime.
Importance of complying with requirements of the FIC Act
The Amendment Act has introduced the risk-based approach which allows an accountable institution to determine the level of money laundering and terrorist financing risk a business relationship or transaction poses and to apply the necessary Due Diligence requirements as described in the institution’s Risk Management and Compliance Programme (RMCP). Accountable institutions must develop and implement their own customised RMCP based on the money laundering risks applicable to their businesses by 2 April 2019.
Take some time to familiarise yourself with the requirements and to ensure that your business complies by completing the FICA Online Course on the Masthead Learning Centre.
Masthead can assist accountable institutions in developing and implementing a unique RMCP. Contact your Masthead compliance officer or regional office.
Click on the links below to read the detailed Administrative Sanctions imposed on each business:
- JDG Trading (Pty) Ltd t/a Nissan Mthata
- European Automotive Imports of South Africa (Pty) Ltd t/a Maserati
- SMG Auto Cape Town (Pty) Ltd
- Mystic Cars (Pty) Ltd
- Gold Trader Mossel Bay (Pty)