The Financial Intelligence Centre Act redeems itself!

South Africa

Combating and criminalising money laundering activities and financial acts of terrorism is an important feature of the Financial Intelligence Centre Act No. 38 of 2001 ("FICA") along with the Prevention of Organised Crime Act No. 121 of 1998. As such, ensuring that FICA is effective in curbing the scourge of money laundering activities is critical because money laundering activities and terrorist financing pose a risk to businesses daily. South Africa was greylisted by the Financial Action Task Force ("FATF") because it was found that there were numerous weaknesses in South Africa’s anti-money laundering dispensation. Shortly before the greylisting, FICA was amended in 2022 as one of the measures to comply with the international standards set by the FATF.

Schedule 1 of FICA was amended in a way that extended its scope of application to include additional organisations within the ambit of accountable institutions. These additional institutions include, amongst others, co-operative banks, crypto asset providers, high-value goods providers, the South African Mint Company as well as payment clearing system operators. It is important to note that as with existing accountable institutions, the additional institutions are required to comply with the risk and compliance obligations set out by FICA. These obligations include but are not limited to being registered with the Financial Intelligence Centre ("FIC"); conducting customer due diligence; keeping records of client information and transactions entered into with clients; as well as having a compliance officer.

Schedule 2 of FICA was amended to include the FIC as the supervisory body to oversee adherence with the FICA risk and compliance obligations in relation to non-financial institutions which include crypto asset providers, high-value goods dealers, legal practitioners, trust and company providers, credit providers and the South African Mint Company.

The inclusion of high-value goods dealers in Schedule 1 resulted in the complete deletion of Schedule 3 of FICA. Schedule 3 dealt with reporting institutions which included car dealers and Kruger Rand dealers. Due to Schedule 3 being completely removed from FICA, these institutions will now be included as accountable institutions falling within the ambit of high-value goods dealers in Schedule 1. High-value goods dealers in terms of FICA include businesses that deal with goods of high value and who receive R100,000.00 or more for such goods. The FIC further provides that a high value goods dealer includes "a person who carries on the business of dealing in high-value goods in respect of any transaction where such a business receives payment in any form to the value of R100 000 or more, whether the payment is made in a single operation or in more than one operation that appears to be linked, where “high-value goods” means any item that is valued in that business at R100 000 or more".

In this regard, the FICA obligations to be complied with by accountable institutions are restricted to cases where the full definition of high-value goods dealer is met. As such, an institution which deals with high-value goods valued at less than R100,000.00 will not be required to comply with the full obligations required of high-value goods dealers. However, it should be noted that in terms of section 29 of FICA, all businesses are required to report suspicious and unusual transactions irrespective of whether or not they deal with high-value goods and irrespective of whether they fall within the ambit of being an accountable institution.

In light of these amendments to FICA, it is important for all businesses to assess whether they fall within the ambit of the definition of accountable institutions in FICA, as amended. This is because, given the broader scope of the application of FICA, there are many businesses who now need to comply with FICA, whereas previously (prior to the recent amendment to FICA) they were not required to comply. In this respect, it is advisable for businesses to seek expert advice to establish whether they are required to comply with FICA in light of these recent amendments.