On 19 June 2020 the Minister of Finance published Government Notice 684 in GG 43347 which contained a number of proposed amendments to the Schedules to Financial Intelligence Centre Act. Interestingly, short-term (non-life) insurers have not been included as Accountable Institutions.
One of the amendments is of particular importance to financial services providers and another is of importance to motor dealers.
Financial Services Providers
Currently, any financial services provider who has been authorised to render financial services in respect of any financial product other than short term insurance policies and/or health service benefits provided by a medical scheme, is required to register as an Accountable Institution. All Accountable Institutions must, inter alia, comply with section 42 of the FIC Act, 2001 and must develop, document, maintain and implement a programme for anti-money laundering and counterterrorist financing risk management and compliance. The complexities of compliance with this requirement require no elaboration.
The proposed amended description of financial service providers who will be required to register as Accountable Institutions will include any financial services provider who has been authorised to render financial services in respect of any financial product other than:
| ● | non-life insurance policy as defined in the Insurance Act, 2017, | |
| ● | any life insurance policy in the | |
| ○ | “Risk” class, | |
| ○ | “Fund Risk” class, | |
| ○ | “Credit Life” class, | |
| ○ | “Funeral” class, | |
| ○ | “Fund Investment” class and | |
| ○ | “Reinsurance” class | |
| as described in Table 1 of Schedule 2 to the Insurance Act, 2017 and | ||
| ● | a health service benefit provided by a medical scheme. | |
In other words, any FSP who is currently authorised only for short term insurance (non-life insurance), or long-term insurance sub-category A (assistance and funeral policies), B1 or B1-A or a health service benefit provided by a medical scheme, or any combination of these specific products, will not be required to register as an Accountable Institution.
FSPs who transact solely in funeral policies will, arguably, be the greatest benefactor in this regard and will no longer be required to “develop, document, maintain and implement a programme for anti-money laundering and counterterrorist financing risk management and compliance.”
Motor Dealers
Schedule 3 to the FIC Act – List of Reporting Institutions – will be deleted. Motor dealers are currently included in Schedule 3 as Reporting Institutions. Reporting Institutions are required, inter alia, to report cash threshold transactions where cash in excess of R24 999,99 is paid in any transaction concluded with a client.
Instead, the proposed amendment includes a new description of an Accountable Institution. Item 20 of the description of Accountable Institutions now includes any person who carries on the business of dealing in high value goods in respect of any transaction where such a business receives a payment or payments in any form of R100 000,00 or more, whether the transaction is executed in a single operation or in several operations that appear to be linked.
Most motor dealers will fall into this category and will be required to register as Accountable Institutions and inter alia, will continue to be required to report any cash threshold transaction. Of course, this description also applies to other entities who carry on the business of high value goods such as aircraft sales, some antique dealers, many jewelry stores, high-end motor boat and yacht dealers, etc. It looks to be interesting . . .
The current wording of the proposed amendments does, however, leave an anomaly. What will happen to those motor dealers who operate at the very lower end of the market – those businesses that sell motor vehicles for less than R100 000,00? Does this mean that these businesses will not be required to report cash threshold transactions?
This is highly unlikely and we can expect some small additional changes to the FIC Act and the Schedules that will accommodate this apparent anomaly. We can also expect some ruling on how a business will be required to demonstrate that it does not carry on the business of dealing in high value goods and thus escape the obligation to register as an Accountable Institution.
The Government Notice makes reference to a consultation paper (just released) that provides further explanation of the proposed amendments to the Schedules to Financial Intelligence Centre Act.
Should you require any assistance relating to any FICA related matter, please contact our Compliance Department on the following details, for further assistance: support@moonstonecompliance.co.za.
