Our Financial Regulation team recently prepared a client alert with details about entities that are deemed accountable institutions in terms of Schedule 1 of the Financial Intelligence Centre Act, 2001.
The new entities (impacting the consumer sector) deemed to be accountable institutions in Schedule 1 include:
- a person who carries on the business of a credit provider; and
- a person who carries on the business of dealing in high-value goods in respect of any transaction where that business receives payment in any form to the value of ZAR 100 000 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 ZAR 100 000 or more.
The inclusion of credit providers as accountable institutions envisages two categories of credit providers. The first category are credit providers as defined under the National Credit Act (NCA). The second category are persons 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 (NCA) by virtue of section 4(1)(a) or (b) of that Act.
Section 4(1)(a) and (b)
Section 4(1)(a) provides that the NCA does not apply to credit agreements where the consumer is:
- a juristic person whose asset value or annual turnover, together with the combined asset value or annual turnover of all related juristic persons, at the time the agreement is made, equals, or exceeds ZAR 1 million;
- the state; or
- an organ of state.
Section 4(1)(b) provides that the NCA does not apply to a credit agreement where the amount of credit extended exceeds ZAR 250 000 and where the consumer is a juristic person whose asset value or annual turnover, together with the combined asset value or annual turnover of all related juristic persons, at the time the agreement is made, is below ZAR 1 million.
The amendments to Schedule 1 now mean that although persons who provide credit in terms of a credit agreement to consumers described in section 4(1)(a) and (b) (ie juristic entities) would not fall within the ambit of the NCA, such credit providers will be considered accountable institutions for the purposes of FICA and must comply with the provisions of FICA.
Where a person carries on the business of dealing in goods which have a value of ZAR 100 000 or more, and the person receives payment for those goods to the value of ZAR 100 000 or more, the person will be considered a high-value goods dealer and therefore an accountable institution for the purposes of Schedule 1.
Obligations as a new accountable institution
The amendments to Schedule 1 took effect on 19 December 2022 and the obligations to comply with FICA as an accountable institution are officially in effect. New accountable institutions are required to register with the Financial Intelligence Centre (FIC) within 90 days from the date on which the amendments are published by notice in the gazette which was 29 November 2022. Failure to register with the FIC can lead to administrative sanctions which include monetary penalties.
New accountable institutions must also have their risk management and compliance programmes (RMCPs) in place. RMCPs deal with the processes and procedures that an accountable institution must implement to comply with its FICA obligations. The obligations include implementing customer identification and verification processes, conducting customer due diligence, appointing a compliance officer, training employees on FICA compliance, and undertaking business risk assessments.
The FIC and other supervisory bodies do not envisage issuing financial penalties for non-compliance with FICA during the first 18 months following the commencement of the amendments. Nevertheless, supervisory bodies may conduct inspections and, where warranted, will issue remedial administrative sanctions, based on a risk-based approach, to correct identified areas of non-compliance.
Read the original publication at Webber Wentzel.