Proposed amendments to Schedules 1, 2 and 3 of the Financial Intelligence Centre Act (FICA) were published on 19 June 2020 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. A consultation paper providing explanatory notes to the proposed amendments was also published by the Financial Intelligence Centre (the Centre).
Schedule 1
Schedule 1 contains a list of entities that are classified as Accountable Institutions.
The proposed amendments relating to Financial Services Providers (FSPs) listed in Schedule 1 is that any FSP who is authorised to render financial services (advice or intermediary services) in respect of a financial product will be required to register as an Accountable Institution, excluding those FSPs who are only authorised for:
- a non-life insurance policy as defined in the Insurance Act, 2017, (short-term insurance);
- a life insurance policy in the
- “Risk” class
- “Fund Risk” class
- “Credit Life” class
- “Funeral” class
- “Fund Investment” class and
- “Reinsurance” class
as described in Table 1 of Schedule 2 to the Insurance Act, 2017; and
- a health service benefit provided by a medical scheme in terms of the Medical Schemes Act.
Should the above proposals be accepted and take effect it would have an impact on FSPs that are currently authorised only for those financial products to be excluded, such as short-term insurance (non-life) or assistance and funeral policies or health service benefits, or any combination of these products. These FSPs will not be listed as Accountable Institutions and accordingly will not be required to comply with the obligations imposed on Accountable Institutions such as those mentioned below, which should provide some relief to those FSPs who are currently defined as Accountable Institutions.
Some of the other key proposed amendments to Schedule 1 pertain to:
- The inclusion of businesses dealing in high value goods. This relates 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. Motor dealers and Kruger Rand dealers which are currently classified as Reporting Institutions will be added to this category meaning that these businesses will need to comply with the obligations applicable to Accountable Institutions.
- The inclusion of Trust and Company Service Providers. Accountants who prepare or carry out transactions for clients relating to specific types of activities would fall into this category. Accountants were not previously covered within the scope of the FICA.
- The inclusion of Co-operative Banks.
- The inclusion of certain Credit Providers.
- The inclusion of the South African Mint Company (RF) Proprietary Limited.
- The inclusion of certain Crypto Asset Service Providers.
- The inclusion of a clearing system participant that facilitates or enables the origination or receipt of any electronic funds transfer.
The types of entities listed in Schedule 1 (Accountable Institutions) must comply with a number of provisions of FICA when dealing with their customers. These obligations include: registration with the Centre; conducting customer due diligence; record-keeping of client information and transaction records; developing, documenting, maintaining and implementing a Risk Management and Compliance Programme (RMCP); ongoing training of employees on the FICA and the institution’s RMCP; appointment of a compliance officer; and reporting obligations such as the submission of cash threshold reports, suspicious transactions reports and terrorist property reports.
Schedule 2
Schedule 2 contains a list of Supervisory Bodies in terms of FICA. The proposed amendments to Schedule 2 will enable the Centre to take over the responsibility of overseeing and enforcing compliance with FICA in respect of the non-financial sector activities involving estate agents, gambling institutions, trust and company service providers and legal practitioners. The reason for this is the low level of compliance identified in these businesses and the lack of sanctions imposed by current supervisory bodies.
Schedule 3
Schedule 3 contains a list of Reporting Institutions in terms of FICA. These are currently Motor and Krugerrand dealers. However, as a result of their inclusion in the “high value goods” category to be introduced in Schedule 1, the proposed amendments will result in Schedule 3 being deleted.
Interested parties are invited to submit comments on the proposed amendments to National Treasury via e-mail at commentdraftlegislation@treasury.gov.za before close of business on 18 August 2020.