Legal Talk - Financial Intelligence Centre Act

Financial Intelligence Centre Act

Estate agents are “accountable institutions” within the scope of the Financial Intelligence Centre Act, Act 38 of 2001 (FICA). This article provides a broad overview of estate agents duties in terms of FICA.

THE DUTY TO ESTABLISH AND VERIFY THE IDENTITY OF CLIENTS (S21):

An accountable institution may not establish a business relationship or conclude a single transaction unless the prescribed steps have been taken to establish and verify the identity of:

• The client;

• The person representing the client;

• The person for whom the client may be acting.

In terms of Exemption 2, however, an accountable institution may by, way of exemption from section 21 of the Act, accept a mandate from a prospective client to establish a business relationship or to conclude a single transaction, before the accountable institution has verified the identity of that prospective client, provided that the accountable institution verifies the identity of that client before the institution:-

(a) Concludes a transaction in the course of the resultant business relationship; or

(b) Performs any act to give effect to the resultant single transaction.

THE DUTY TO REPORT TO THE FIC:

Section 29 imposes a duty to report suspicious transactions on any person who carries on a business or is in charge of or manages a business or who is employed by a business.

You have a duty to report suspicious transactions where you suspect that:

• The business in which you are involved has received, or is about to receive the proceeds of any unlawful activity;

• A transaction or series of transactions in which your business is involved has facilitated or is likely to facilitate the transfer of proceeds of unlawful activities from one person to another or from one location to another;

• A transaction or series of transactions in which your business is involved has no apparent business or lawful purpose;

• A transaction or series of transactions in which your business is involved is conducted to avoid giving rise to a reporting duty under FICA;

• A transaction or series of transactions in which your business is involved may be of interest to the South African Revenue Service in a possible investigation of tax; or

• The business in which you are involved has been used or is about to be used in any way to hide or disguise the proceeds of unlawful activities;

• Suspicious transactions must be reported as soon as possible but not later than 15 working days after becoming aware of a fact concerning such transaction;

• A person may continue with a transaction from which a report emanates;

• Section 38 provides for the protection of a person making the report. No action, whether criminal or civil, can be instituted against any natural or legal person who complies in good faith with the reporting obligations of the FICA;

• ln terms of regulation 22 of the Money Laundering Control Regulations, a report must be made by means of the internet-based reporting available on the FIC’s website at www.fic.gov.za. In exceptional cases where a person does not have the technical capability to make a report electronically that a person may send it by facsimile to the FIC on 012 315 5828, or deliver itto the FIC situated at 240 Vermeulen Street, Pretoria, 0001.

THE DUTY TO KEEP RECORDS (S22):

In terms of section 23 of FICA an accountable institution must keep the records referred to in section 22 of FlCA which relate to:-

• The establishment of a business relationship for at least five years from the date of which that transaction is concluded;

• A transaction which is concluded for at least five years from the date in which that transaction is concluded.

THE DUTY TO FORMULATE INTERNAL RULES (S42)

Internal rules must include issues on:

• The establishment and verification of client identities — Regulation 25;

• Record keeping — Regulation 26;

• Reporting of information — Regulation 27.

• An accountable institution must provide training to its employees on the FIC Act and internal rules applicable to them;

• A compliance officer is responsible for ensuring that training takes place;

• Training should be ongoing with regular refresher courses;

• Employees may be assessed to evaluate the level of knowledge and understanding;

• Employees should be blocked from dealing with clients if they have not received training on the FIC Act and internal rules;

• The duty to appoint a compliance officer (S43);

• An accountable institution has a duty to formally appoint a Compliance Officer;

• The Compliance Officer should have general knowledge of the overall operations of the institution and interact with all of the departments and branches to keep abreast of changes that may require action to manage perceived risk;

• The compliance officer must have sufficient authority and independence to have access to all areas of the institution’s operations and to effect corrective action.

EXCEPTION 11

Any person who receives or collects monies on behalf of a:

• Share Block Scheme; or a

• Body Corporate.

Is exempted from:

• Duty to identify clients;

• Duty to keep records;

• Measures to promote compliance.

The Estate Agency Affairs Board and the Financial Intelligence Centre are conducting joint inspections of estate agency firms throughout the country. A special task team has been appointed as inspectors comprising officials from both the EAAB and FIC.

With a view to determining whether provisions of both the Estate Agency Affairs Board Act and the Financial Intelligence Centre Act are being complied with inspections will be carried out accordingly.

Notices have already been served on several agencies, and some inspections have already been conducted. Inspectors must be allowed access to all books and records of the estate agency.

The inspectors will be checking for compliance in the following areas:

• Section 26 of the Act in that the agency and all branch offices and estate agents are properly registered and have been issued with a valid fidelity fund certificate by the Estate Agency Affairs Board;

• Section 29(a) of the Act in that the accounting books and records fairly reflect and explain the state of affairs and the financial position of the company;

• Section 29(b) of the Act in that accounting records have been duly audited and statutory auditor’s reports have been timeously submitted to the Estate Agency Affairs Board;

• Section 32 of the Act in that all trust banking accounts are properly opened, designated, maintained, balanced and reconciled;

• Section 34B(1) of the Act in that all candidate estate agents did not complete or draft the specified documents or clauses in such documents; and

• Section 34B(2) of the Act in the event of any noncompliance with section 34B(1);

• All contracts of sale, lease agreements, written mandates and other estate agency documentation concluded by the company, will be inspected to verify that such documents comply with, inter alia, the Code of Conduct for Estate Agents and the provisions of the Alienation of Land Act, and any other relevant legislation, and that leases have been properly stamped in terms of the Stamp Duties Act, and where applicable that the requirements of the Income Tax Act has been adhered to.

The Financial Intelligence Centre for its part intends to satisfy itself that the provisions of FICA are being complied with.

Courtesy: Agent – The Official Publication of the Estate Agency Affairs Board

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