New accountable institutions were added to the Financial Intelligence Centre Act (FICA), and those who fail to abide by the legislation face imprisonment or heavy fines.
According to Angela Itzikowitz and Era Gunning at ENSafrica, the November 2022 amendments to the FICA came into effect ahead of the Financial Action Task Force (FATF) potentially greylisting South Africa.
Organisations that sell any items that total R100,000 or more to anyone in all forms of payments will be considered accountable institutions. This applies to sole proprietors, companies and all other types of business.
Itzikowitz and Gunning said that “dealers in art, motor vehicles, equipment, scrap metal, and even bicycles and televisions will now be treated the same as banks and other financial institutions for purposes of FICA.”
Organisations that provide credit to clients are also likely seen as accountable institutions according to FICA, even if the National Credit Act applies.
To avoid greylisting, the South African government is targeting businesses that can facilitate money laundering and the financing of terrorism – such as crypto asset service providers – by making them accountable institutions.
These institutions will have greater responsibilities and will not simply be required to perform customer due diligence or monitor transactions for possible criminal activity. These obligations have far greater scope and include aspects such as:
- registering with the Financial Intelligence Centre (FIC) as an accountable institution by mid-March 2023.
- creating and executing a risk management and compliance programme (RMCP).
- establishing a compliance officer
- training staff
A board of directors or senior management must ensure that the accountable institution and its employees abide by the FICA and the RMCP.
For sole properties, partnerships or something similar, the individual with the most authority bears responsibility, but in most cases, a compliance officer should also be appointed.
The Financial Intelligence Centre (FIC) said that it would ensure these regulations are abided by.
The FIC said it would focus on implementing FICA risk and compliance provisions for new sectors added to the list of accountable institutions. Inspections by supervisory bodies and, where warranted, give remedial administrative sanctions to rectify areas of non-compliance.
The FIC said that it and supervising bodies did not envision issuing fines for non-compliance during the first transitional 18-month period – till May 2024.
However, future non-compliance can lead to imprisonment for a period not greater than 15 years or a fine that does not exceed R100 million.