The FIC Act lists estate agents –as defined in the Estate Agency Affairs Act, 1976 (Act 112 of 1976) – as accountable institutions and requires them to be fully compliant with the FIC Act. Why are Property Practitioners listed in the Act as accountable institutions?
The property sector has been identified as being at risk of being abused by money launderers. This sector has been used to hide funds and as a vehicle to help criminals introduce their proceeds into the financial system.
The property space has the potential for criminals to put into practice all three aspects of typical money laundering activity: placement, laying and integration. Furthermore, they can clean or hide large amounts of money in a single transaction. The purchase of a dwelling, plot or building for a large sum of money, for example, may not raise too many alarm bells. For these reasons, estate agents can become easy targets for criminals wanting to use them to launder their illicit funds. Given that estate agents are familiar with their industry, their clients’ behaviour and their habits, these industry experts are also best suited to identify when certain behaviour is suspicious or unusual.
Central to being listed under Schedule 1 of the FIC Act as accountable institutions, estate agents are required to fulfil seven obligations to achieve compliance with the FIC Act.
FIC Compliance Course
Why was FICA amended? – The pressure to strengthen the Act came about following the infamous Fidentia Pyramid Scheme, one of South Africa’s biggest financial scandals to date. Fraudster J Arthur Brown was able to defraud 47 000 widows and orphans of their savings, amounting to more than R500 million. This showed that the legislation we had clearly wasn’t enough.
The biggest factor that led to the amendment was South Africa’s membership in the Financial Action Task Force (FATF), the international regulatory body dedicated to fighting money-laundering. Prior years saw South Africa fall short of the requirements for membership, which meant we were under threat of being kicked out. And without membership, our local banks would have been unable to meaningfully participate in the global banking community.
All entities classified as “accountable institutions” in terms of Fica must comply, which includes the latest amendments.
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