The Financial Intelligence Centre Act 38 of 2001 (hereinafter referred to as “FICA” or the “Act”) was legislated primarily to combat various unlawful activities, such as money laundering and other unlawful transactions. Essentially, FICA imposes an obligation on all Accountable Institutions to verify the identity/origin of the funds of persons they are entering into a business relationship with or concluding a transaction with.
FICA defines Accountable Institutions as any institution referred to in schedule 1 of the Act. Schedule 1 contains an extensive list of Accountable Institutions, some of which are listed without limitation below:
- A practitioner who practices as defined in section 1 of the Attorneys Act, 1979 (Act 53 of 1979).
- A board of executors or a trust company or any other person that invests keep in safe custody, controls or administers trust property within the meaning of the Trust Property Control Act, 1988 (Act 57 of 1988).
- An estate agent as defined in the Estate Agency Affairs Act, 1976 (Act 112 of 1976).
- A person who carries on the ‘business of a bank’ as defined in the Banks Act, 1990 (Act 94 of 1990).
- A person who carries on a ‘long-term insurance business’ as defined in the Long- Term Insurance Act, 1998 (Act 52 of 1998).
Electronic transfer of money to or from South Africa
Draft regulations have been gazetted to supplement the provisions of the existing section 31 of the Act, which has not commenced yet.
This means that section 31 will have the following practical outcome:
- An Accountable Institution that sends R5, 000 or more by Electronic Funds Transfer (EFT) out of South Africa, or receives R5, 000 or more by EFT from outside of South Africa on behalf of another person, or on the instruction of another person must not later than 3 days from becoming aware make an international funds transfer report to the Centre;
- Any person or institution which fails to provide the information to be reported concerning an international funds transfer report is guilty of an offence and is non-compliant and subject to an administrative sanction. This could result in imprisonment for a period of 3-15 years or a fine not exceeding R100 million;
Furthermore, the draft regulations also propose amending the requirements relating to cash transaction reporting.
Report to the Financial Intelligent Centre (FIC) if in terms of the transaction an amount of cash more than R50,000 is paid by it to the client or received by it from the client. The same timeline and reporting standard applies.
Note: In terms of the media statement that accompanied the draft regulations, cash transactions more than R50,000 over 24 hours will not be treated as a single transaction.
This means that transactions as small as R5,000 would require reporting. Therefore, moving money and serving foreign clients could become more challenging.
In terms of cash, it is always advisable to not to pay or receive large amounts of money. Besides the obvious risk, if this amendment becomes law, there would be an additional compliance layer.
It is, therefore, in my view as a Commercial Lawyer, crucial to review your existing processes and to adjust accordingly. Contact an expert at SchoemanLaw to assist.