NEW ACCOUNTABLE INSTITUTION (AI) KIDS ON THE BLOCK

Amendments to the Financial Intelligence Centre Act (FICA), as embodied in the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act, started to come into effect on 31 December 2022. All the amendments will be in force by 1 April 2023.

Schedule 1 of FICA now lists 23 types of AIs. When reading through the list, remember "person" includes "legal entity". FIC may impose an administrative sanction if the FIC finds that an AI or any person with an obligation to comply with the FIC Act has not complied with the FICA or with a directive issued in terms of the FICA.

Herein the changes made;

ITEM 1/ LEGAL PRACTITIONERS: This scope has been broadened to now include Advocates and Juristic Entities delivering legal services to members of the public. With the re-scoped item 2 (see herein below) Legal Practitioners now will also have to add a second registration as TC Service Providers to their existing registration if applicable.

ITEM 2/ TCSP (TRUST OR COMPANY SERVICE PROVIDERS):  A trust and company service provider is any person in the ordinary course of business who assists their client in the creation, operation and management of an external company, a foreign company, a close corporation or a trust. This includes attending to the registration of the business entity with the relevant authority/ies. Organizations that provide the services of a TCSP will be considered AI’s, regardless of whether their employees are auditors, accountants or any other professionals.

ITEM 11/ CREDIT PROVIDERS

(a) A person who carries on the business of a credit provider as defined in the National Credit Act, 2005 (Act 34 of 2005).

(b) A person who carries on the business of providing credit in terms of any credit agreement that is excluded from the application of the National Credit Act, 2005 by virtue of section 4(1)(a) or (b) of that Act.

Listed herein above at (a) is the first category of credit providers, which includes all persons who carry on business as a credit provider as covered by the National Credit Act, 2005 (Act 34 of 2005) (NCA).

In terms of section 1 of the NCA, the definition of credit provider is wide and includes numerous different persons which include:

  • The party who supplies goods or services under a discount transaction, incidental credit agreement or instalment agreement;
  • The party who advances money or credit under a pawn transaction;
  • The party who extends credit under a credit facility;
  • The mortgagee under a mortgage agreement;
  • The lender under a secured loan;
  • The lessor under a lease;
  • The party to whom an assurance or promise is made under a credit guarantee;
  • The party who advances money or credit to another under any other credit agreement;
  • Any other person who acquires the rights of a credit provider under a credit agreement after it has been entered into.

Listed herein above at (b) is the second category of credit providers, which includes all persons who carry on the business of providing credit in terms of any credit agreement that is excluded from the application of the NCA, by virtue of section 4(1)(a) or (b) of the NCA. 

This is a very extensive category, and the onus is on the entity to prove that they do not fall within this category. 

Below are a few examples of credit providers and credit agreements which will fall within this category of persons;

  • Clothing store credit providers;
  • Companies that provide any type of loans to employee/s;
  • Companies that provide any type of loans to juristic person/s;
  • Short-term and long-term loans and credit transactions;
  • Entities that provide incidental credit or Incidental credit agreements;
  • Microfinance loans;
  • Small, intermediate and/or large credit agreements;
  • Low-cost housing loans;
  • Credit card/s;
  • Credit overdraft/s;
  • Unsecured and secured credit agreements;
  • Credit transactions;
  • Closed loop and open loop credit facilities;
  • Retail store card credit facilities;
  • Credit facility providers;
  • Revolving credit agreements.

ITEM 20/ HIGH VALUE GOODS DEALERS: This will include 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.

 “Time is running out for new accountable institutions to register with the FIC”

WHAT DO YOU NEED AS AN ACCOUNTABLE INSTITUTION

  • A Board resolution appointing an Anti-Money Laundering (AML) Compliance Officer as well as a Deputy Anti-Money Laundering (AML) Compliance Officer if necessary due to the size and complexity of your business;
  • A Board resolution accepting the obligations as per your personalized RMCP;
  • Registration at the FIC
  • A personalized RMCP to fit your specific business needs;
  • A personalized Risk Based Matrix used as basis to risk rate different client types and conduct CDD;
  • A Risk Classification used to individually risk rate each different client type
  • Annual FICA Refresher Training and Testing of all staff members as directed by the FIC

-Andrea Venter