In 2017, the Financial Intelligence Amendment Act (FICA) brought massive changes to South Africa’s anti-money-laundering regulations. Five years later in 2023, the country is yet again implementing significant change as it aims to avoid possible greylisting by the Financial Action Task Force (FATF). This possible downgrade is due to FATF’s unfavourable findings during their 2021 Mutual Evaluation of South Africa.
Therefore, to assist South African Accountable institutions and other interested parties, we have unpacked the key changes applied to the current national AML Compliance framework.
Firstly, it is important to note that the body of accountable institutions has been expanded to include new institutions, and at the same time former reporting institutions have been absorbed, deleting schedule 3. Significant changes are as follows:
- Accountable Legal Practitioners were originally limited to attorneys. The amendments expand this to include advocates and legal firm entities on top of attorneys practising on their own accounts.
- Crypto Service Providers are a new addition to the list of accountable institutions. The Financial Advisory and Intermediary Services Act has already recognised crypto assets as
financial products. Following these amendments, Crypto Asset Service providers are accountable under FICA, and include anyone who engages with crypto for reasons unrelated to personal investments (administrators, etc). Exchanges and possibly even wallet providers are covered by the wide definition in the purported schedule 1. - Trust Service Providers have been extended from trusts as per the Trust Controls Act to other activities, including: creation of trusts, the operation or management of companies, or the management of client money, securities or other assets.
- Co-operative banks are a new addition to the list of accountable institutions.
- The insurance business institutions have been extended to include reinsurers to cater to the Insurance Act amendment act.
- Credit providers have been extended to include credit providers that do not fall under the ambit of the National Credit Act.
- Financial Services providers that provide either advice OR intermediary services are now accountable. Only Financial Service Providers that provided both advice AND intermediary services were accountable under the previous working.
- Money Remitters are now accompanied by value transfer providers, extending this accountable institution from just monetary value to other types of value.
- High value goods dealers are a new type of accountable institution that absorbed the previous two reporting institutions into it. This type of institution is accountable where it
trades in single goods valued at R100,000 or more. Motor vehicle dealers and Krugerrand dealers, previously reporting institutions now fall under this category of accountable
institutions. - The South African Mint Company (RF) that trades in collectable and non-circulated coins and precious metals is a new category of accountable institutions.
- EFT Clearing system participants are a new category of accountable institution that will allow for Know Your Customer (KYC) efforts on electronic fund transfers that are not undertaken through banks, including all those under the National Payments Systems Act.
Secondly, the amendments to FIC purport to reduce the list of supervisory bodies in schedule 2 of the Act. Law societies, the National Gambling Board, the Independent Regulatory Board for Auditors, the Estate Agency Affairs Board and all provincial licensing authorities have been deleted from the supervisory bodies list. The FIC now assumes the supervisory responsibility previously held by these bodies.
A third key amendment is that of the Money Laundering and Terrorist Financing Regulations (MLTF Regs) which have increased the cash reporting threshold from R25,000 to R50,000. Accountable institutions will now have three days to report any cash transactions of this amount, up from the original two days. Finally, there is no longer an obligation to monitor for and report on amounts that together total R50,000. Only single amounts of R50,000 or more are reportable.
The final amendment to note is the amendment to section 31 of FICA, which has created a new reporting obligation for International Fund Transfers of more than R20,000. The only institutions that are required to report under section 31 are entities authorised to execute cross-border transfers under the Currency and Exchanges Act, 1933 (Act 9 of 1933 ), specifically authorised dealers and authorised dealers with limited authority.
Prior to robust and maintained implementation, will these amendments persuade FATF to maintain South Africa’s green status? And if not, can we expect even further amendments in the near future? Either way, with an international AML regulatory spotlight on South African, FICA compliance is now high priority for accountable institutions.