FIC Act - Managing money laundering risk in the property sector

The property sector can be targeted by criminals as a channel for laundering their criminal proceeds. Because they are vulnerable to being abused by criminals for purposes of money laundering, the FIC Act lists estate agents as accountable institutions.

In terms of the FIC Act, estate agents are required to comply with certain obligations that assists their industry and South Africa in the fight against financial crime.

These obligations include registering with and reporting to the Financial Intelligence Centre (FIC), applying a risk-based approach, developing, and implementing a risk management and compliance programme (RMCP), conducting customer due diligence, record implementing a compliance function.

REGISTRATION AND REPORTING

All accountable institutions, including estate agents, are required to register with the FIC before they can begin submitting reports to the FIC. Registration is free and must be done via the FIC’s of the FIC Act, there are three main reporting streams for all accountable institutions::

• Suspicious or unusual transaction reports (STRs) – Filed when there is a suspicion of money laundering or terrorist financing. A transaction is unusual where it is not clear that the purpose of the transaction is lawful An STR should be submitted as soon as possible to the FIC, but no later than 15 days of becoming aware of such activity or transaction.
• Cash threshold reports (CTRs) – Filed when cash is either received or paid in excess of the prescribed limit of R24 999.99. Cash refers to paper money, coins and travelers’ cheques, which is legal tender and medium of exchange. CTRs are reportable within two (2) days of the transaction.
• Terrorist property reports (TPRs) – TPRs are reportable when the institution has in its possession or control property that is associated with terrorist and related activities. TPRs are reportable within five (5) days of becoming aware.

RISK-BASED APPROACH

A risk-based approach is fundamental to the application of the FIC Act. A risk-based approach requires accountable institutions such as the property sector to understand their exposure to money laundering, terrorist financing and proliferation financing risks. Following a risk-based approach will allow estate agents to make informed decisions on how to manage or mitigate these risks.

Estate agents have a greater discretion in determining the appropriate compliance steps for themselves. They must, however, ensure that adequate processes, proportionate to the size and complexity of their agency, are in place to identify and assess money laundering and terrorist financing risks.

RISK MANAGEMENT AND COMPLIANCE PROGRAMME(RMCP)

An estate agent’s RMCP documents the institution’s view on how it ensures it will meet its compliance obligations. The programme can include policy documents, and must detail all the processes, systems and controls used for risk management such as consumer due diligence, record keeping and reporting, and how a risk-based approach will be applied. The estate agents RMCP must be kept up to date and approved by senior management.

CUSTOMER DUE DILIGENT (CDD)

CDD is the institution’s understanding of who the client is. This is done by obtaining information from the client and verification would be required.

RECORD KEEPING

Documentation and information must be kept for both client documents as well as transactional information. These records must be kept for at least five years from the date on which the business relationship was terminated or five years from the date that a transaction was concluded, or a report submitted to the FIC.

COMPLIANCE FUNCTION

Senior management of an estate agency is responsible for compliance with the FIC Act. To assist management in discharging their obligations, they may appoint a compliance function including a compliance officer who has sufficient competency and seniority to ensure effectiveness.

TRAINING OF EMPLOYEES

Ongoing training on the FIC Act as well as the estate agency’s RMCP must be provided to its employees.

For more information on how the property sector can manage their money laundering and terrorist financing risks, please visit the FIC on www.fic.co.za.

Courtesy: The Agent - Estate Agency Affairs Board (EAAB)