Accountable Institutions
Schedule 1 to the Financial Intelligence Centre Act, 2001 (FIC Act) has been amended, and took effect from 19 December 2022. Some of the amendments to the list of accountable institutions have far-reaching consequences that not all practitioners may be aware of. They may result in many firms and their clients becoming accountable institutions, which implies a greater burden of compliance with the FIC Act.
Schedule 1 to the FIC Act
The amendments to the list of accountable institutions contained in Schedule 1 to the FIC Act, as published in the Government Gazette No. 47596, dated 29 November 2022, became effective from 19 December 2022.
Among other amendments, the following item added to the list of accountable institutions is of critical importance: ‘20. 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 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, where “high-value goods” means any item that is valued in that business at R100 000,00 or more.’
The following amendment may also be relevant in some circumstances: ‘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 –
(aa) 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); (bb) 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 (cc) 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 –
(i) acting for a client as a nominee as defined in the Companies Act, 2008; or
(ii) 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, safekeeping, control or administering of trust property within the meaning of the Trust Property Control Act, 1988 (Act 57 of 1988).’
Among others, the FIC reference guide for all accountable institutions explains how to register as an accountable institution and what the obligations are, in terms of the FIC Act.
High-value goods
It can easily be argued that a business selling motor vehicles as part of their ordinary course of business will fall within the definition of receiving payment for high-value goods, as the sales transaction for each motor vehicle may be more than R100 000. Even if the sales amount is not settled in one single payment, the payments would still be linked to the same sales transaction. The FIC has explained, however, that installing a solar system, for example, may result in separate payments for different components of the system that are not necessarily linked, e.g. the solar panels, the battery and the inverter.
Auditing and accounting firms should not only consider whether their clients deal in high-value goods, but also whether their firm itself may be seen as providing high-value goods to clients. Firms are encouraged to study the FIC Draft Public Compliance Communication No. 119 for further guidance and examples in this regard.
Trust and company service providers (TCSPs)
Not all auditing and accounting firms are involved in assisting clients with the creation, operation or management of trusts, but there may be instances where practitioners act as trustees of client trusts.
What is more common is that many firms assist clients with the creation, operation or management of companies and operations, or the management of closed corporations. To some extent, this may be included by the company secretarial department of a firm.
Firms are encouraged to study the FIC Draft Public Compliance Communication No. 6A for further guidance in this regard, focusing especially on the inherent risks and potential risk indicators relating to TCSPs.
In summary
Your firm or your clients may be seen as trading in high-value goods, or are defined as TCSPs based on the new amendments. As the amendments are already effective, it is critical to register as an accountable institution and take the necessary steps to comply with the FIC Act.
LEAF can assist firms with technical consultations and staff training on the relevant requirements, and procedures.
References
1. FIC: Government Notice No. 2800 issued in Government Gazette No. 47596, amending Schedules 1, 2 and 3 to the FIC Act, 2001 2. FIC: Reference guide for all accountable institutions 3. FIC: Draft Public Compliance Communication No. 6A, Guidance on trust and company service providers for the purpose of schedule 1 to the Financial Intelligence Centre Act, 2001 (Act 38 of 2001) 4. FIC: Draft Public Compliance Communication No. 119, Guidance on the interpretation of high-value goods dealers, item 20 of schedule 1 to the Financial Intelligence Centre Act, 2001 (Act 38 of 2001) and potential risk indicators
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