Draft FIC Guidance Issued for Credit Providers

13 Jan

The Financial Intelligence Centre (FIC) issued the Draft Public Compliance Communication (PCC) 23A on 18 December 2024, replacing the previous PCC 23.

The draft PCC provides updated guidance on the interpretation and application of the term "credit providers" as listed in Item 11 of Schedule 1 of the Financial Intelligence Centre Act, 2001 (FIC Act).

All institutions offering credit in South Africa, including those indirectly involved through credit agreements or special purpose vehicles, are affected and must take note. Exemptions apply to certain incidental credit providers as clarified in the guidance.

Key Highlights of Draft PCC 23A:

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Definition of Credit Providers
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- Credit providers include any person (natural or legal) carrying on the business of providing credit under agreements defined in the National Credit Act (NCA) or excluded from the NCA under specific conditions.
- Examples: Mortgage lenders, credit card issuers, microfinance entities, and businesses offering employee loans.
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Inclusions and Exclusions
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- Inclusions: Factoring, loan book sales, and institutions managing run-off loan books.
- Exclusions: Incidental credit providers (e.g., medical professionals charging late payment fees) do not need to register.
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Risk Assessment and Indicators
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- Credit providers must assess risks related to money laundering (ML), terrorist financing (TF), and proliferation financing (PF) at both business and client levels.
- Indicators include unusual repayment patterns, overpayments with refund requests, or economic activities that do not align with the client’s profile.
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Registration Requirements
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- Entities engaging in credit provision, including those acquiring rights from loan books, must register with the FIC as accountable institutions and comply with obligations such as customer due diligence and targeted financial sanctions.
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Consultation and Deadlines
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- The FIC invites public comments on the draft by 7 February 2025.
- Stakeholders can submit comments via the FIC’s online platform.

What Accountants Should Do

Ensure client entities who are fulfilling the definition of a credit provider are appropriately registered and adhere to FIC Act obligations.
Educate clients about identifying and mitigating risks relating to money laundering (ML), terrorist financing (TF), and proliferation financing (PF).
Engage in the consultation process to address practical challenges.

The draft PCC 23A has been through prior consultation process but comments can still be provided to the FIC by 20 January 2025 using the form here.

Stay informed and proactive to navigate these regulatory updates effectively!

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