The Financial Intelligence Centre (FIC) and National Treasury recently published draft regulations and draft guidance notes for public comment. The draft regulations address sections 28 and 31 of FICA which deal with Cash Threshold Reporting (CTR) and Aggregation, and International Funds Transfer Reporting (IFTR) respectively. The draft regulations were published together with a consultation paper prepared by the FIC which sets out the basis for the draft regulations. There are also two draft guidance notes namely Draft Guidance Note 104 which relates to International Funds Transfer Reporting, and Draft Guidance Note 5C which relates to Cash Threshold Reporting. The draft regulations and draft guidance notes are open for public comment until 1 April 2019.
International Funds Transfer Reporting
Section 31 of the FIC Act which applies to the movement of funds into and out of South Africa via electronic transfers, has not yet been brought into operation. The publication of the draft amendments to the Regulations which deals with this section is a step towards this section coming into effect. The objective of this section is to ensure that information relating to cross-border electronic funds transfers is reported to the Centre through the submission of an IFTR to enhance the FIC’s ability to analyse information concerning financial flows which, in turn, strengthens its ability to detect possible suspicious or unusual activity and to disseminating the relevant information to investigating and prosecuting authorities.
Which accountable institutions are affected?
The obligation to report international fund transfer transactions only applies to those accountable institutions who are authorised to conduct the business of cross-border electronic fund transfers. Accountable institutions with this authorisation are:
– Authorised Dealers (ADs);
– Authorised Dealers with Limited Authority (ADLAs);
– A category of Financial Services Providers (FSP) that have a direct reporting dispensation under the Exchange Control Regulations; and
– The Post Office.
A transaction which involves the electronic transfer of funds into or out of South Africa and which is above the prescribed threshold will trigger an obligation to submit an IFTR Report. Because cross-border electronic funds transfers, even in small amounts, are a potential terrorist financing threat posed by cross-border electronic funds transfers the practice is that IFTR thresholds are generally set at low levels. For this reason, it is proposed that the prescribed amount of funds above which a transaction must be reported to the FIC be set at R4 999.99 (all cross-border transactions of R5000.00 and above will have to be reported to the FIC). The draft Regulations propose that an accountable institution must submit a report within 3 days.
The commencement date for section 31 of FICA (IFT reporting) is yet to be determined by the President however the FIC marks 1 April 2019 as the date on which all internal systems of affected reporters must be ready to accommodate IFT reporting to the FIC.
Cash Threshold Reporting and Aggregation
The FIC has been reviewing its operational capabilities and through this process has identified improvements that can be made in the efficiency of the cash transaction reporting process which is a current requirement. Some of the proposed changes to Cash Threshold Reporting (CTR) and Aggregation include:
- Increasing the Cash Threshold Amount from R24 999.99 to R49 999.99.
- Dispensing with the aggregation requirement. The effect of this will be that cash transactions in excess of the applicable threshold over a 24 hour period will not be treated as a single transaction.
- The period for reporting CTRs to the FIC to be increased from 2 days to 3 days.
Accountable institutions that will be affected by these proposed changes will need to update their FICA Risk Management and Compliance Programme.