FICA Update - Amendments to Expand Business Accountability

The Financial Intelligence Centre Amendment Act 1 of 2017 (FICA Amendment Act) has recently made significant waves in South Africa, expanding the scope of business accountability. This article explores these amendments' implications and compliance's crucial importance not only for homeowners but for businesses as well.

FICA's Scope Widened

In a previous article, we discussed the sweeping changes brought about by the FICA Amendment Act. Published in May 2017, this act amended the 2001 FICA Act to primarily target financial crimes such as tax evasion, money laundering, and terrorist financing activities. To achieve this, the Amendment Act widened the net of accountability, casting it over a broader range of businesses and individuals within South Africa's financial system.

Link to the previous article - Important Notice - FICA Compliance in Property Transactions

Implications of the Amendments

The Amendment Act designates "accountable institutions," including banks, property practitioners, attorneys, and businesses offering services like money remittance, long-term insurance, and foreign exchange. However, the implications of these amendments extend beyond these institutions. Anyone engaging in single transactions or business relationships with these accountable institutions is also affected.

One of the most significant implications of the FICA Amendment Act is the increased scrutiny of business owners and "beneficial owners." This ensures that legal entities are not misused for illegal activities such as tax evasion. Due diligence processes concerning customers have been enhanced to gain a deeper understanding of the risks they pose.

Business owners must now identify, understand, and assess the risks of terror financing and money laundering associated with their services and products. A risk-based approach to combating these activities means businesses less susceptible to such activities will face lighter regulation, while those at higher risk will undergo more stringent oversight. Additionally, provisions for freezing assets associated with terrorism in line with United Nations Security Council Resolutions have been introduced.

The Protection of Personal Information Act (POPI Act) mandates that every business be responsible for collecting, processing, storing, and sharing personal information. The Amendment Act also addresses previous constitutional concerns by introducing inspection powers for regulatory compliance purposes.

Compliance Requirements

To navigate these new regulations effectively, accountable institutions, clients and consumers engaging with them must familiarise themselves with the FICA Amendment Act. Compliance is essential to avoid severe penalties and maintain transparency and integrity in the financial system.

Key compliance requirements include:

• Identification of Business Owners and Beneficial Owners: This helps prevent the misuse of legal entities for illegal activities such as tax evasion.
• Enhanced Due Diligence for Customers: Businesses must understand customer risks more deeply.
• Risk Assessment: Businesses must identify, understand, and assess terror financing risks and money laundering risks in their services and products.
• Compliance with POPI Act: This involves responsible handling of personal information.
• Inspection Powers: Regulatory compliance inspections are now permitted, addressing constitutional concerns.
• Enhanced Administrative and Enforcement Mechanisms: These ensure compliance and deter noncompliance.

Consequences of Noncompliance

Failure to comply with the FICA Amendment Act can result in severe consequences. Penalties for noncompliance include significant financial penalties, with natural persons potentially facing fines of up to R10 million and legal entities up to R50 million.

The Imperative of Compliance

Given the potential legal and financial repercussions, businesses must prioritise compliance with the FICA Amendment Act. By doing so, they not only avoid penalties but also contribute to the overall integrity and transparency of South Africa's financial system. Compliance fosters trust among customers and partners and safeguards businesses from becoming unwitting vehicles for illicit activities.

Compliance with the FICA Amendment Act is especially critical in the real estate and property market. Property Practitioners, for example, fall under the category of accountable institutions and must diligently adhere to these regulations. Ensuring that property transactions are conducted under the law protects the industry's reputation and upholds the integrity of real estate transactions.

The FICA Amendment Act represents a significant shift in financial regulation in South Africa. It expands the accountability of businesses and individuals alike with stringent compliance requirements. Understanding and adhering to these regulations is a legal necessity and a fundamental step in safeguarding the financial system's integrity and your business's reputation. Compliance is not an option; it's an imperative!

Contact one of our offices below if you're unsure about the amended FICA requirements. Our Property Practitioners are eager to assist you with any queries you may have.

Read our previous article here

Contact one of our offices below; we look forward to hearing from you:
Gauteng: 011 463 0155
Cape Town: 021 418 0328 
Garden Route: 044 050 3295
Eastern Cape: 076 927 7787
Winelands: 021 863 0551
Mauritius: +230 5723 0369
Email: reception@hamiltons.co.za 

Hamilton's Property Portfolio holds a Fidelity Fund Certificate issued by the Property Practitioners Regulatory Authority.