The Monthly Compliance and Legislation Update (MCLU) is a webinar and newsletter service offered by SA Accounting Academy (SAAA) to keep accountants and others updated on the latest legal and regulatory changes. This is a teaser of some of the key issues to be discussed by SAAA’s technical advisor, Lettie Janse van Vuuren, in the upcoming webinar on Wednesday 17th April. Sign up here.
There were nearly 50 regulatory and legal updates in the month of March 2019.
SA launches targeted financial sanctions:
SA has signed on to the United Nations‘ Targeted Financial Sanctions which is published and updated regularly listing out terrorists and their enablers. “The TFS measures contained in the Financial Intelligence Centre (FIC) Act relate to combating the financing of the proliferation of weapons of mass destruction as well as other instances of TFS-related to threats to the peace, breaches of the peace and acts of aggression.
“It is prohibited to acquire, collect or use of property of persons or an entity whose names appear in the TFS list. This includes providing financial services and/or products to those persons or entities. No person may transact with a sanctioned person or entity, or process transactions for such a person or entity.”
Laundering money using property and casinos
The FIC has issued a new directive (5/2019) establishing clear guidelines for the reporting of unusual or suspicious transactions. The Financial Intelligence Centre (FIC) was set up to detect and eliminate financial crime and money laundering in the interests of economic growth.
Automated Transaction Monitoring Systems (ATMS) are used by financial institutions to monitor customer transactions and generate alerts of unusual or suspicious transactions that could point to money laundering.
A new report issued by the FIC provides case studies on how criminals are laundering money using casinos and property. “Casino employees and managers should pay attention to certain transactions as they may point to money being launder through casino value instruments. These transactions may include the purchase of casino chips followed by immediate cashing in of those funds with little or no gaming activity; customers’ gaming history in the context of their financial situation and profiles, and/or the clear absence of any intention to win,” says the report.
Another money laundering scheme being used by crooks is to arrange fixed games: two “opponents” buy chips with cash, participate in a fixed game where winning is not the objective, and then cash out.
The report details a number of case studies where money launderers were picked up and arrested: two suspects were found to be smuggling illicit bulk cash in and through South Africa and out of the country. “Both subject were part of an international syndicate that smuggles bulk cash that represents the proceeds of unlawful activities. Subsequently approximately R76 million was seized at Lebombo border post. FIC analysis revealed that the subjects travelled very frequently through the border post in the morning, gambled at the casino, then travelled to Dubai the following day, returned two days later and then gambled again shortly thereafter.
“The FIC identified that the subjects were spending the proceeds at the casino and acted as cross border cash couriers. The cash was seized on this basis, and the suspects were convicted of contraventions of the exchange control regulations, Customs and Excise Act, fraud and money laundering. The cash with a total value of R76 million and a Toyota Hilux were forfeited to the state.”
You can be sure of one thing: the FIC’s eyes are all over the casinos.
How criminals use property to launder crime proceeds
The FIC also reports that criminal organisations launder money through estate agencies, bond brokerage firms, and development or construction companies, to facilitate access to the property sector. “In one such example a launderer incorporated a number of shell companies and trust accounts, through which illicit proceeds had been funnelled to purchase property. This made it difficult to trace the funds. To further legitimise their property transactions, launderers can incorporate construction and development companies. These companies would then purchase properties, financed in part by bonds provided by other shell companies established by the launderer.”
Criminals will also use bonds, registered to a nominee, in an attempt to launder funds. This also reduces their risk in the event that the property is forfeited to the state.
Changes to the manner in which interest is charged on fidelity funds
This is important information for lawyers and their accountants. On 1 November 2018, the Legal Practice Act (LPA) dissolved the four law sopcieties in the country and replaced them with nine provincial councils. The Attorneys Fidelity Fund (AFF) became the Legal Practitioners Fidelity Fund (LPFF), and the trust interest previously paid to the Law Societies will be payable directly to the Legal Practitioners Fidelity Fund (LPFF).
SARS’ changes to subsistence allowances
In terms of Notice 268, subsistence allowances for employees whose accommodation is paid in advance by the company will be entitled to claim for incidental costs to the equivalent of R134 a day, and R345/day in the case of meals plus incidental costs.
In the case of foreign travel, a updated table has been published reflecting the allowable amounts in foreign currencies.
Vendor jailed for 7 years for VAT fraud
Last month SARS announced that a Kwazulu-Natal VAT vendor had been jailed for VAT fraud amounting to R3,9 million. Ms Saraspathie Vallee (47) of Chatsworth, as sole proprietor of the closed corporation Gutterpride Trading, pleaded guilty to VAT fraud and contraventions of the Prevention of Organised Crime Act.
Using SARS’ eFiling service, she claimed a VAT refund to the value of R3,9 million on behalf of Gutterpride for a single tax period in 2014 and SARS was supplied with falsified supporting documents to substantiate the claim. SARS reduced the refund and after outstanding taxes were liquidated an amount of R2,5 million was refunded to the entity.
Competition Commission cases of price fixing
It’s been a busy month for the Competition Commission, which recently reached agreed to a settlement with Paramount Mills, which admitted to price fixing of white milled maize between 1999 and 2007. It was found that Paramount had participated in various meetings to fix the price of white milled maize and create uniform price lists for wholesale, retail and general trade customers. Paramount admitted guilt and agreed to an administrative penalty of R1,3 million.
Another penalty of R1,3 million was imposed on power cable company Alcon for price fixing between 2001 and 2012. “Alcon also admits to fixing prices of power cables through the Association of Electric Cable Manufacturers South Africa (AECSMA). Under the auspices of the AECMSA, Alcon discussed and agreed to quotation indices with competitors. These indices were used to escalate prices when bidding for short- and long-term tenders to supply electric cabling products between 2001 – 2012,” says the Competition Tribunal.
Ster-Kinekor Theatres agreed to a penalty of R436,000 and to offer qualifying small advertising agencies 25% bonus space for every R1 they spend with the company. Ster-Kinekor was found to have colluded with other media companies to offer 16,5% discounts to accredited agencies, prejudicing non-accredited agencies which were offered 15%.
New IRBA Code of Conduct
The IRBA Code of Professional Conduct for Registered Auditors released late last year outlines the five fundamental principles for the profession: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour. The impact and importance of this code will be covered in the webinar.
Some other topics to be discussed
Other changes to be discussed in the Monthly Compliance the Legislative Update webinar:
- Mandatory submission of financials when filing Annual Returns to the CIPC (Companies and Intellectual Property Commission)
- The National Small Enterprise Act (Thresholds); and
- The Value-added Tax Act (1 April amendments)
- New guidelines for auditors relating to the quantification and likelihood of contingency claims arising from litigation
Sign up for the April 17th 2019 MCLU webinar here.