NEW ACCOUNTABLE INSTITUTIONS DEFINED BY FICA

In an effort to deal with the possible grey listing of South Africa and strengthening the fight against money laundering, terrorist financing and proliferation financing, the FIC recently made some changes. With effect from 19 December 2022, the list of Accountable Institutions in Schedule 1 was amended, and the updated list is as follows:

1. (a) A person who is admitted and enrolled to practise as a legal practitioner as contemplated in section 24(1) of the Legal Practice Act, 2014 (Act 28 of 2014) who is:

• an attorney (including a conveyancer or notary) practising for his or her own account as contemplated in section 34(5)(a) of that Act; or

• an advocate contemplated in section 34(2)(a)(ii) of that Act

(b) A commercial juristic entity, as contemplated in section 34(7) of the Legal Practice Act, 2014

2.(a) A person who carries on the business of preparing for, or carrying out, transactions for a client, where–

(i) the client is assisted in the planning or execution of

• the organisation of contributions necessary for the creation, operation or management of a company, or of an external company or of a foreign company, as defined in the Companies Act, 2008 (Act 71 of 2008)

• the creation, operation or management of a company, or of an external company or of a foreign company, as defined in the Companies Act, 2008; or

• the operation or management of a close corporation, as defined in the Close Corporations Act, 1984 (Act 69 of 1984).

(b) a person who carries on the business of–

• acting for a client as a nominee as defined in the Companies Act, 2008; or

• arranging for another person to act for a client as such a nominee.

(c) A person who carries on the business of creating a trust arrangement for a client;

(d) A person who carries on the business of preparing for or carrying out transactions (including as a trustee) related to the investment, safe keeping, control or administering of trust property within the meaning of the Trust Property Control Act, 1988 (Act 57 of 1988).

3. An estate agent as defined in the Estate Agency Affairs Act, 1976 (Act 112 of 1976).

4. An authorised user of an exchange as defined in the Financial Markets Act, 2012 (Act 19 of 2012).

5. A manager registered in terms of the Collective Investment Schemes Control Act, 2002 (Act 45 of 2002), but excludes managers who only conduct business in Part VI of that Act.

6. A person who carries on the “business of a bank” as defined in the Banks Act, 1990 (Act 94 of 1990)

7. A mutual bank as defined in the Mutual Banks Act, 1993 (Act 124 of 1993).

7A. A co-operative bank as defined in the Co-operative Banks Act, 2007 (Act 40 of 2007).

8. A person who carries on a life insurance business as defined in the Insurance Act, 2017. This excludes a reinsurance business, as defined in this Act;

9. A person who carries on the business of making available a gambling activity as contemplated in section 3 of the National Gambling Act, 2004 (Act 7 of 2004) in respect of which a license is required to be issued by the National Gambling Board or a provincial licensing authority.

10. A person who carries on the business of dealing in foreign exchange.

11. (a) A person who carries on the business of a credit provider, as defined in the National

Credit Act, 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.

12. A person who carries on the business of a financial services provider requiring authorisation in terms of the Financial Advisory and Intermediary Services Act, 2002 to provide advice or intermediary services in respect of the investment of any financial product (but excluding a non-life insurance policy, reinsurance business as defined in the Insurance Act, 2017 and the business of a medical scheme as defined the Medical Schemes Act, 1998)

13. A person who issues, sells or redeems travellers’ cheques, money orders or similar instruments.

14. The South African Postbank Limited referred to in section 3 of the South African Postbank Act, 2010 (Act 9 of 2010)

15. A person who carries on the business of a money or value transfer provider

16. 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 ZAR100 000 or more, where "high-value goods" means any item that is valued in that business at ZAR100 000 or more. This specifically relates to tangible items that are traded, sold or bought in the ordinary course of business of that entity. For example, an audit firm that is downsizing and selling their fleet of vehicles for R135 000 each would not be part of the regular feature of the audit firm’s business. However, a tanzanite dealer who has items that are over R100 000 each, would fall within the ambit of the HVGD.

17. The South African Mint Company (RF) (Pty) Ltd, only to the extent that it distributes non-circulation coins in retail trade and where in respect of such transactions it receives payment in any form to the value of R100 000,00 or more, whether the payment is made in a single operation or in more than one operation that appears to be linked.

18. A person who carries on the business of one or more of the following activities or operations for or on behalf of a client:

• (a) exchanging a crypto asset for a fiat currency or vice versa;

• (b) exchanging one form of crypto asset for another;

• (c) conducting a transaction that transfers a crypto asset from one crypto asset address or account to another;

• (d) safekeeping or administration of a crypto asset or an instrument enabling control over a crypto asset;

• (e) participation in and provision of financial services related to an issuer's offer or sale of a crypto asset; and

  where “crypto asset” means a digital representation of perceived value that can be traded or transferred electronically within a community of users of the internet who consider it as a medium of exchange, unit of account or store of value and use it for payment or investment purposes, but does not include a digital representation of a fiat currency or a security as defined in the Financial Markets Act, 2012 (Act 19 of 2012).

19. A clearing system participant as defined in section 1 of the National Payment System Act, 1998 that facilitates or enables the origination or receipt of any electronic funds transfer and or acts as an intermediary in receiving or transmitting the electronic funds transfer.

These entities now have a responsibility to do the following:

• register with the FIC as accountable institutions by mid-March 2023;

• submit reports to the FIC;

• have a FICA compliance function;

• record keeping;

• Implementing a risk-based approach to customer due diligence

• creating and executing a risk management and compliance programme (RMCP)

• ensure that all staff is trained on the adopted RMCP.

The FIC further stated that it and supervising bodies are not intending to issue any fines for non-compliance during the first transitional 18-month period until May 2024. Thereafter, non-compliance by these entities can lead to imprisonment for a period not greater than 15 years or a fine that does not exceed R100 million.

To read further on the amendments click here