FIC Upholds Penalties on Estate Agency for Compliance Failures

The Financial Intelligence Centre (FIC) has recently affirmed the importance of compliance when it found an estate agency non-compliant with several critical FIC Act requirements. In a recent ruling, the Appeal Board of the FIC supported the administrative sanctions levied against estate agency Capital Point Properties.

Details of the Non-Compliance

Section 42 of the FIC Act requires all accountable institutions to have in place a risk management and compliance programme (RMCP). An RMCP documents the identified money laundering, terrorist and proliferation financing risks the institution faces, and how it will deal with these risks. An institution’s RMCP must contain the institutional risk assessment, policy documents, and detail all the processes, systems and controls used for aspects such as customer due diligence, record keeping, reporting, and how the risk-based approach will be applied across the institution. Refer to PCC 53, Guidance Note 7, and draft Guidance Note 7A.

During an inspection, it was discovered that Capital Point Properties failed to develop and timely implement a risk management and compliance program (RMCP). The agency also did not scrutinise clients against the targeted financial sanctions (TFS) list, nor did it comply with Directive 6, which mandates the submission of a risk and compliance return questionnaire within a specified timeframe.

Sanctions Imposed

As a result of these transgressions, Capital Point Properties faced a total fine of R266,000, broken down as follows:

• R108,000 for the failure to implement an RMCP,

• R108,000 for not screening clients against the TFS list, and

• R50,000 for non-compliance with Directive 6.

Judgment and Implications

The Appeal Board emphasised that rectification of the transgressions post-inspection does not negate the need for sanctions, underlining that previous non-compliance still warrants penalty. Christopher Malan, Executive Manager for compliance and prevention at the FIC, highlighted the necessity for accountable institutions to engage actively during inspection and enforcement stages and to avoid frivolous appeals. He stressed that the FIC is mandated to impose penalties to ensure compliance and change in behavior regarding AML and CFT obligations.

This ruling serves as a stern reminder to all accountable institutions of their obligations under the FIC Act.