In the recent FIC Appeal Board decision of Truck World (Pty) Ltd vs The Financial Intelligence Centre and Another, a motor vehicle dealer’s appeal against an administrative sanction was dismissed.
Background
The motor vehicle dealer, Truck World, commenced operations in 1997 and had only registered with the FIC on 23 July 2019, after the FIC had issued a notice of inspection on 11 July 2019. The FIC proceeded with the inspection in July 2019, and found that Truck World had failed to comply with certain provisions of FICA, namely to timeously register with the Centre and to report two hundred and four (204) cash threshold reports (CTR) within two business days of each transaction having taken place, which amounted to R26 648 127.50.
The administrative sanction imposed by the FIC
As a result of the non-compliance, the FIC imposed the following sanctions on the motor vehicle dealer:
- A formal reprimand;
- A directive to remediate the transactions that ought to have been reported to the FIC within 10 days of the date of receipt of the Notice of Administrative Sanction;
- A financial penalty in the amount of R2 664 812 (of which 50% was to be paid over a consecutive 12-month period. The balance of the financial penalty was suspended for three years on condition that the motor vehicle dealer complied with the reporting obligations in Section 28.
- However, if Truck World reported all their unreported transactions, 60% of their financial penalty would be suspended and 40% thereof would be payable over a 12-month period.
- A caution in terms of Section 45C (3) of the Act not to repeat the conduct that led to the non-compliance.
Appeal
On appeal, Truck World reasoned their non-compliance, inter alia, on the fact that they were unaware of their statutory obligations as a motor vehicle dealer, in terms of the FIC Act. It also contended that the financial penalty imposed by the FIC was excessive and unjustified considering that all the transactions had been reported and remediated since the initial inspection.
The FIC found that the motor vehicle dealer’s failure to register and to submit the CTRs due to ignorance of their obligations imposed by the Act, does not excuse their non-compliant conduct or avert an administrative sanction. Furthermore, the fact that the motor vehicle dealer took remedial action to report all the unreported transactions (after the notice of inspection by the FIC), does not avert a sanction, as the failure on its own constitutes non-compliance.
In reaching their decision, the Appeal Board decisively noted, referring to the decision in Cozitone (Pty) Ltd t/a Cash Inn v The Financial Intelligence Centre (Case No 12/3/1/5-Cash Inn, 8 August 2016), that the failure by a motor vehicle dealer to acquaint himself or herself with the statutory obligations under the Act, constituted negligence.
The appeal was dismissed, and the decision of the FIC was confirmed.
Conclusion
Truck World’s ignorance of the law did not constitute a justifiable reason to be non-compliant with the mandatory provisions of the Act. It is noted in the decision that the absence of knowledge in certain limited instances however may impact upon the degree of blameworthiness and is a factor to be considered when determining the appropriate sanction. Nevertheless, the penalties attached to non-compliance should not be taken lightly given the administrative sanctions and reputational damage that may well be imposed on the offending party.
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.
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