Grace Period Expires for New Accountable Institutions to comply: 19 June 2024
This article is the first of a series focused on the obligations of Accountable Institutions (AIs) under the amended Financial Intelligence Centre Act (FIC Act). We start by explaining which entities need to register as AIs and the steps involved in the registration process. In the upcoming articles, we'll delve deeper into what being an AI entails, covering the specific requirements, how to conduct thorough due diligence, manage risks effectively, and fulfil reporting duties. Each piece aims to provide clear guidance on navigating these regulatory landscapes, ensuring your business complies and operates smoothly within the legal framework.
Why did we need to change the legislation?
“If corruption is a disease, transparency is essential part of its treatment”
During 2022-23 we saw several laws updated by our government, with the General Laws Amendment Act amending key financial laws having a direct impact on the work of accountants. The (FIC Act) was one of these laws that was amended. The new FIC Act came into effect on 19 December 2022, bringing on board a broader range of entities as Accountable Institutions (AIs). This was done to extend anti-money laundering and counter-terrorism financing obligations to more sectors.
To grasp the need for legislative changes, it's important to consider the Financial Action Task Force (FATF), a global body dedicated to combating money laundering and terrorism financing. South Africa, a FATF member, must adhere to its guidelines to protect its financial system. In February 2023, FATF placed South Africa on its 'greylist' due to shortcomings in its anti-money laundering measures. The recent amendments to South African laws are efforts to address these gaps, broadening the scope of businesses required to monitor and report suspicious activities. These changes demonstrate South Africa's commitment to enhancing its financial safeguards and aligning with international efforts to curb financial crimes.
Why do you need to worry about this?
New AIs were given a generous 18-month grace period to facilitate their compliance with the regulations and requirements. This period ends on 19 June 2024, and by this time all entities must fully comply with the FIC Act requirements. The FIC and other supervisory bodies conduct regular inspections to ensure compliance. The first step in avoiding penalties is to know whether you fall under any of the items listed in Schedule 1.
Know If You Are an Accountable Institution
Whether you or your practice qualifies to be an accountable institution, we need to look at the type of services that you provide. If you provide any of the services listed below you should register as an AI. If you do not register you are non-complying with the provisions of the FIC Act and can be held liable.
Recently Added/amended AIs
Advocates
Legal professionals who handle transactions involving significant sums of money or assets now fall under this category. Their role often involves activities that could potentially be exploited for money laundering if not properly monitored.
Crypto Asset Service Providers (CASPs)
CASPs include any business that provides any form of service related to Crypto of virtual assets, from providing advice to facilitating payment or storage of assets. It is the persons who provide services around the crypto assets and not the technology itself that is deemed to be an AI.
Credit Providers
Persons falling under the National Credit Act who carry on business as a credit provider, including:
o Advances money or credit under a pawn transaction
o Extend credit under a credit National Credit Act facility
o A secured loan or mortgage bond
o Assurance or promise under a credit guarantee
o Advances money or credit to another under any other credit agreements
Draft note is issued by FIC – still subject to comments.
Specifically excluded from the definition are persons who do not fall under the National Credit Act but carry on the business of providing credit under a credit agreement to juristic persons where the principal debt is over R250,000.
Payment Clearing Providers
Organisations that facilitate the clearing and settlement of payment transactions between banks or financial institutions.
Trust and Company Service Providers (TCSPs):
Persons who carry on the business of preparing for or carrying out transactions for a client who is a commercial activity or institution (not charity), including:
o Creation of such business – including advising on legal requirements associated with the legal structure or creation of an entity or assisting in creating the entity through CIPC
o Operation: involved in ongoing operations of the client
o Management: playing any active role, making or steering decisions of the business or operations. .
Specific exclusions as per Guidance note 6A:
o Purely administrative/bookkeeping functions, including recording, or capturing of company data or information, including book-keeping functions.
o The administrative submissions of information or data for legislative purposes, such as the filing of tax returns.
o Performing functions that do not amount to any decision-making steering or influencing business operations.
Refer to the CIBA’s public support library for the list of CIBA Guides you can download form your member profile. You can also read Public Compliance Communication PCC No. 6A for more information.
2. High-Value Goods Dealers
Businesses selling single items worth more than R100,000, such as car dealerships or art galleries, must register as AIs. Even if a dealer only stocks a few high-value items, they are still required to comply with FIC regulations for transactions involving these items.
NOTE: If you sell any single physical item, worth more than R100,000 you are considered an AI and you cannot get around registering as one. This applies even if you only stock a few items over R100,000.
Anyone who arranges a sale or charges a transaction in a way to avoid these obligations, will be also in contravention of the Act and commit an offence.
Need to register? This is how
All entities or persons identified as AIs must register with the website or the Financial Intelligence Centre (FIC) electronically. The process has 3 steps:
Verifying Eligibility: Understanding whether your business falls into one of the AI categories.
Completing Registration: Using the GoAML system provided by the FIC to officially register your business.
Implementing Due Diligence Measures: Establishing processes to accurately identify and verify the identities of clients, especially those involved in high-value transactions.
You will need to upload the following documents:
A certified copy of an identity document/passport of the compliance officer and
A signed authorisation letter from the entity when registering that must:
Be on the letterhead of the entity, and
Contain the username and surname, identity or passport number, occupation of the user, and
The role of the user to be allocated on the system.
All queries relating to goAML should be directed as follows:
LOG a compliance query
DOWNLOAD the “goAML Registration Guideline for Accountable Institutions”
DOWNLOAD the “goAML IFTR user guide”
VIEW the step-by-step videos on how to register or update your details on goAML
ACCESS all the user guides
FILE a risk and compliance return (RCR)
Consequences of Non-Compliance
Failure to register and comply with the FIC Act can lead to significant penalties, including remedial administrative sanctions or fines. Additionally, intentionally structuring transactions to avoid FIC obligations is considered an offence and could lead to more severe legal consequences.
Learn more with CIBA’s short CPD on the Practical Implementation
What you will learn
By attending this webinar you will gain the following competencies:
Possess background information on the Financial Intelligence Centre Act (FICA).
Have complete knowledge of who the new Accountable Institutions are as introduced under Schedule 1 of FICA.
Gain insights into the 7 key steps required to become FICA compliant.
Get an overview of the consequences of non-compliance with FICA.
Have a practical FICA compliance guide that you can implement in your firm.
