Proposed amendments to FICA
In June 2020, proposed amendments to the Financial Intelligence Centre Act (FICA) Schedules were published for public comment. The proposed amendments seek to align FICA with the current International Standards of the Financial Action Task Force (FATF) and recent legislative amendments. Some of the proposed amendments include adding a new category of high value goods in Schedule 1 (Accountable Institutions) of FICA and also propose the deletion of Schedule 3 of FICA (which lists Reporting Institutions).
What does high value goods mean?
This proposed new category in Schedule 1 applies to a person who carries on the business of dealing in high value goods. High value goods relate to any transaction where such a business receives a payment or payments in any form of R100 000 or more, whether the transaction is executed in a single operation or in several operations that appear to be linked.
High value goods are vulnerable to misuse for money laundering and the financing of terrorism purposes because these goods can be readily purchased and sold anonymously. The Financial Intelligence Centre (FIC) notes that while criminals can potentially use any high value goods to launder illicit funds, some high value goods are more vulnerable to being misused for money laundering or the financing of terrorism than others, such as dealers in precious metals and precious stones (i.e. jewellers), antiques and collectibles, fine art, aircrafts, boats and luxury motor vehicles.
Motor vehicle dealers now Reporting Institutions will become Accountable Institutions
Motor vehicle dealers are currently listed as Reporting Institutions under Schedule 3 of FICA. As Reporting Institutions, motor vehicle dealers have just two compliance obligations in terms of FICA, i.e. to register with the FIC and to file regulatory reports for suspicious transactions and cash threshold reports. However, when motor vehicle dealers become Accountable Institutions, they will have more obligations in terms of FICA.
Failure to comply with these regulatory requirements may lead to an administrative sanction being imposed.
Sanctions for FICA non-compliance by motor vehicle dealers
The FIC recently published a number of administrative sanctions which it meted out against motor vehicle dealers for failing to comply with its obligations as Reporting Institutions in terms of FICA. The FIC may impose an administrative sanction if it finds that an institution or person has failed to comply with a provision of FICA and/or its directives.
– An administrative sanction may include the following:
– A caution not to repeat the conduct that led to the non-compliance
– A directive to take remedial action
– A reprimand
– The restriction or suspension of certain business activities
– A financial penalty
The FIC Annual Report for the 2020/21 period confirmed that the FIC issued 24 administrative sanctions against non-compliant motor vehicle dealers. These sanctions amount to a total financial penalty of more than R33 million. Two of the motor vehicle dealers lodged appeals against the sanctions imposed, with the remaining 22 sanctions amounting to R28,357,509.00.
Below, we look at the areas of non-compliance that were identified during the 2020/21 period:
- Submission of Cash Threshold Reports
There were 22 motor vehicle dealers that failed to submit Cash Threshold Reports (CTRs) to the FIC. Where accountable and reporting institutions receive or pay out cash in excess of R24 999.99, it is required to submit a report to the FIC as soon as possible but not later than two days of becoming aware of the transaction. Further, the FIC issued a Directive to remediate and report the outstanding CTRs against 15 of the non-compliant motor vehicle dealers.
It is recommended that motor vehicle dealers do daily checks on bank statements in order to detect these transactions and file the necessary CTRs as soon as possible. - Registration with the Financial Intelligence Centre
There were 16 motor vehicle dealers that were reprimanded for failing to timeously register with the FIC. All accountable and reporting institutions must register with the FIC within 90 days of the day the business having commenced.
Going forward – What do the proposed amendments mean for Motor Vehicle Dealers?
As stated above, once the proposed amendments to the FIC Schedules come into operation, motor vehicle dealers that receive payments in any form of R100 000 or more will fall under the new category of high value goods in Schedule 1 of FICA. This means that motor vehicle dealers will be classified as Accountable Institutions instead of the current Reporting Institutions and will therefore need to comply with the far more extensive FICA obligations that are applicable to Accountable Institutions.
Masthead can assist you with FICA compliance, preparation for FIC inspections and FICA training
We offer a wide range of services to all Accountable and Reporting Institutions including FICA training for your employees, hands-on assistance with the implementation of FICA requirements in your business and support services when preparing for a FIC Inspection.
Speak to your Masthead Compliance Officer or get in touch with us for more information on how Masthead can assist you to be compliant in terms of the FICA requirements