Closely related to the recent greylisting of South Africa is the passing late in 2022 of the new General Laws Anti-Money Laundering and Combating Terrorism Financing Amendment Act, 22 of 2022 (“Amendment Act”). The Amendment Act introduces several key changes to areas of law affecting trusts, companies and non-profit organisations in an attempt to tighter regulate these entities seen as prevalent to abuse for illicit criminal activities. Importantly for estate agents, changes have also been introduced to the Financial Intelligence Centre Act 38 of 2001 (“FIC Act”) which affects all estate agents as Accountable Institutions. In this article we take a quick look at some of the main Amendment Act changes estate agents must take note of.
Firstly, estate agents must appreciate that they qualify as Accountable Institutions in terms of the FIC Act and are therefore required to comply fully with the FIC Act and the amendments thereto as introduced by the Amendment Act.
The Amendment Act has streamlined some of the definitions in the FIC Act relating to politically exposed persons, locally and foreign. The terms Politically Exposed Person (PEP) and Prominent Influential Person (PIP) are now used to refer to such persons domestically or from foreign countries.
Examples of domestic PEPs include government ministers, certain members of the judiciary and traditional leaders in South Africa to individuals that hold a prominent public function (as listed in Schedule 3A of the FIC Act). In respect of foreign PEPs, these include individuals from foreign countries entrusted with a prominent public function, such as heads of states etc.
A new Schedule 3C to the FIC Act defines PIPs to include individuals who have held the position of a chairperson of the board of directors and audit committee, executive officer or chief financial officer of a company in the last 12 months, and which entity provides goods or services to an organ of state and the annual transactional value of the goods or services or both exceeds an amount to be determined by the Minister, e.g. through a government tender.
Estate Agents will need to understand these definitions and identify domestic and foreign PEPs and PIPs that they engage with as clients. The FIC Act places extensive screening requirements on Accountable Institutions to not only determine whether clients are potentially PEPs or PIPs but also screen them against internal sanctions lists.
A major new definition introduced by the Amendment Act and going to the core of the amendments is the responsibility of Accountable Institutions, which include estate agents, to identify and verify the ‘Beneficial Owners’ of entities such as companies, trusts and partnerships they deal with. This will essentially require the identification of who the ultimate natural person(s) is who owns or controls the entity. This new requirement aims to provide enforcement agents greater insight into the nature of transactions and whom the natural persons are behind the entities involved in the transaction. For estate agents, this means they will need to identify such beneficial ownership when engaging with any entity form.
Lastly, it is worth mentioning that estate agents are required to report any transaction or activity that is suspicious or unusual. However, when collecting ‘FICA’ information from a client, another person may tip off the client that the estate agent may report them, the estate agent may stop the process to avoid such tipping-off and report the transaction to the Financial Intelligence Centre. A failure to report the transaction or activity is deemed as non-compliance and subject to hefty fines.
The above, although only a peek into the duties of an Accountable Institution, should be sufficient to demonstrate the complexity of the responsibilities now placed on estate agents. With the Amendment Act already in effect as of 1 April 2023, there is no time to delay and estate agents must ensure that they update their risk management and compliance programmes accordingly and can meet the extended FICA obligations that are now applicable to them.
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