Big changes for finance laws in South Africa – including tighter regulation for estate agents, casinos and crypto
Finance minister Enoch Godongwana has amended the Financial Intelligence Centre Act (FICA), affecting various financial and non-financial institutions.
In a slew of recent amendments and promulgations, the National Treasury tried to patchwork legislative holes after an international watchdog, the Financial Action Task Force (FATF), discovered gaps allowing terrorist financing and money laundering.
If the legislative holes are not sewn tight, then South Africa could be at risk of a greylisting – damaging and complicating business processes with other jurisdictions.
Amendments to the Financial Intelligence Centre Act form part of efforts by the Treasury to amend five separate pieces of legislation.
The amendment takes effect on 19 December 2022.
Changes to FICA can be broken down into the following five portions:
Greater sectoral coverage
According to the Financial Intelligence Centre (FIC), under the amendment Schedule 1 of the Act, more institutions are now going to be listed as ‘accountable institutions’ that will then be more harshly scrutinised, monitored and supervised.
The amendments push for the following types of entities to be included as ‘accountable institutions’:
- Certain legal practitioners;
- Credit providers;
- Boards of executors or a trust company;
- Estate agents;
- Long-term life insurance businesses
- Dealers in motor vehicles;
- Dealer in goods over R100,000;
- Dealers in crypto assets;
- Dealers in Krugerrands, and;
- Gambling institutions.
The FIC said that the increase in sector coverage will “enhance anti-money laundering, combatting the financing of terrorism and countering proliferation financing supervision and monitoring.”
These amendments do, however, come with a catch in that they put more compliance steps in place that need to be fulfilled before business transactions can conclude.
Notably, the new changes include the regulation of crypto asset service providers alongside a definition of ‘crypto asset’.
Despite some joy in the crypto space over tighter regulation, financial services firm KPMG said that changes to fundamental financial regulation could spell bad news for businesses in the country.
According to its latest insights into the sentiment and concerns of 50 top CEOs in various industries, KPMG found that risks relating to regulatory amendments are one of the biggest concerns of business figureheads.
KPMG noted that certain small amendments to specific pieces of key legislation could have knock-on effects on day-to-day business.
Further critics of the amendments include industry heads from insurance and accounting. Keigan Hart, a spokesperson for Outsurance, said that the amendments – that were in their draft form – could affect insurance processes, with the extra cost of compliance ultimately falling on the consumer.
The South African Insitute of Chartered Accounts (SAICA) also echoed criticism of the amendments – that were drafts at the time – adding that the accounting industry could take on further costs.
Wider scope
A handful of the amendments to certain schedules widen the scope of activities of businesses to align the Act further with the FATF standards.
Trust and company service providers, credit providers, money transfer providers and others will now be required to fulfil FICA risk and compliance obligations, said the FIC.
The centre said that these types of assessments mental implementing a risk-based approach to combating money laundering and terrorist financing.
Removal of certain reporting entities
The new amendments include high-value goods dealers as a category of accountable institutions. These high-value goods dealers include those who do business with valuable motor vehicles or Kruger rands.
“High-value goods dealers include businesses dealing in high-value goods receiving payments in any form of R100,000 or more per item, whether payment is a made in a single transaction or more transactions,” said the FIC.
Dealers in valuable goods will now be in a position whereby they must comply with similar reporting standards of institutions such as legal practitioners or accountants.
Change in supervision and enforcement
Any infringements or straying away from compliance measures will be dealt with by the FIC itself.
“The FIC will oversee and enforce FIC Act risk and compliance adherence among non-financial sectors, including trust and company service providers, legal practitioners, high-value goods dealers, South African Mint Company, CASPs, and credit providers,” said the FIC.
Grace period
Over the first 18 months from 19 December, the FIC, alongside other supervisory bodies, will inspect certain business practise and, where warranted, issue administrative sanctions.
The sanctions will be imposed based on a risk-based approach to correct identified areas of non-compliance, said the FIC.
Although the FIC aim to clamp down on non-compliance, it noted that in respect of the newly added sectors, it does not envisage issuing penalties for non-compliance during the first 18 months of the new law changes.
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