Obligations of Reporting Institutions
Financial Intelligence Centre Act
The amendments to the FIC Act brought about various changes in institutions risk frameworks as it relates to money laundering. But does this apply to all institutions?
In terms of the FIC Act, there are two types of institutions namely accountable institutions and reporting institutions. Schedule 1 of the FIC Act list all accountable and Schedule 3 lists the following entities as reporting institutions:
- A person who carries on the business of dealing in motor vehicles.
- A person who carries on the business of dealing in Krugerrands.
Reporting institutions are not obligated to implement all the administrative requirements which the accountable institutions are required to implement.
Differences between accountable institutions and reporting institutions
Reporting entities does not have a specific supervisory body that supervises and oversee compliance with the FIC Act. Reporting entities are required to report directly to the FIC whereas accountable institutions will report to its Supervisory bodies. And as mentioned above reporting institutions are not required to implement all requirements with which accountable institutions are required to comply.
Let us have a closer look at the definitions of motor vehicle dealers and Krugerrand dealers:
Motor vehicle dealers
The revised Public Compliance Communication 7, published the FIC, provides further clarity as to what is regarding as a motor vehicle dealer.
A motor vehicle dealer is any person who is in the business of buying, selling or exchanging motor vehicles (new or second hand). The FIC considers the following to be a motor vehicle: “any self-propelled vehicle, including a vehicle having pedals and an engine, or an electric motor as an integral part thereof or attached thereto and which is designed or adapted to be propelled by these means on land and includes any trailer and caravan.”
A Krugerrand dealer, in terms of the FIC Public compliance communication 17, includes a person who carries on a business of dealing in Krugerrands but also any person who as a business deal in jewellery, ornaments, watches or objects that contain Krugerrands would also be considered to be a dealer in Krugerrands.
Reporting institutions obligations
The FIC Act requires reporting institutions to comply with the following requirements:
- Cash threshold reporting
Reporting institutions are required to report cash transactions above the prescribed threshold. Cash Transactions for motor vehicle dealers will include motor vehicle-related services and buying or selling of motor vehicle parts. Cash transaction in the context Krugerrand dealers will include purchase or sale of Krugerrands and purchase or sale of a Krugerrand that has been included in the other object.
- Reporting of suspicious and unusual transactions
Section 29 of the FIC Act requires “any person, who carries on a business, is in charge of a business, manages a business, or is employed by a business, must report suspicious or unusual transactions to the Centre.”
- Registration with the Centre
A reporting institution will be required to register with the Centre as well as to update any changes of its business information on the FIC online platform within 90 days of the change.
Reporting institutions are not required to implement client due diligence procedures. However in order to comply with the reporting requirements, the reporting institution will be required to obtain minimum client information, and record transactions details that will enable it to submit reports according to the Regulations.
Non-compliance with FIC Act
The Financial Intelligence Centre may impose administrative penalties for institutions that do not comply with the provisions of the Act. In light of the aforementioned it is suggested that a reporting institution ensure that implements the following in order to comply with the provisions of the Act:
- Cash threshold and Suspicious transaction or activity reporting procedures, which include the process of how transactions will be monitored and the subsequent process of submitting a reporting;
- A procedure to register with FIC and to ensure that the organisation's details remain up to date with the FIC;
- Documenting which client information and transaction detail has to be recorded by its employees;
- Ensure that training is provided to the staff with the reporting institutions obligations
- The process of how the institution will remain updated on any changes to the FIC legislation to directives and guidance that may be issued pertaining to reporting institutions.