The Financial Intelligence Centre (FIC) has again called on designated non-financial businesses and professions (DNFBPs) – particularly legal practitioners and estate agents – to submit their risk and compliance returns (RCRs), saying non-compliance will hinder South Africa’s exit from the grey list.
The FIC is responsible for supervision and oversight of all DNFBPs – legal practitioners, trust and company service providers, estate agents, and the gambling sector, in addition to credit providers, crypto asset service providers, and dealers in high-value goods.
The Centre’s statement, issued yesterday, is the latest in a series of communications about the need for RCR compliance since it issued directives 6 and 7 in March 2023.
Read: FIC cracks down on RCR defaulters: R10 000 fine today, bigger sanctions tomorrow
In its latest statement, the Centre thanked those industries and sectors that have submitted their RCRs, saying these DNFBPs have contributed significantly to bringing South Africa closer to exiting the Financial Action Task Force’s grey list.
Although most of the DNFBP sectors listed as accountable institutions in Schedule 1 to the Financial Intelligence Centre Act “have rallied to the compliance challenge” of remediating the action items through submitting their RCRs, much higher levels of compliance are needed, said Christopher Malan, the FIC’s executive manager for compliance and prevention.
With little to no information on the risks these sectors face, the FIC can only assume that those that are non-compliant are at high risk of money laundering (ML) and terrorist financing (TF) abuse, he said.
The FIC reminded non-compliant DNFBPs that South Africa has only partially addressed the FATF’s concerns pertaining to these entities’ understanding of their ML/TF risks, as well as their compliance obligations.
South Africa is required to “improve risk-based supervision of DNFBPs by implementing and keeping up-to-date supervisory risk-assessment tools to identify higher-risk DNFBPs as a basis for risk-based supervision”.
South Africa has not yet met this requirement fully. This is largely because the number of RCRs submitted by DNFBPs – and legal practitioners and estate agencies in particular – remains unsatisfactory. In accordance with South Africa’s understanding of its ML/TF risks, these two sectors are considered to be higher-risk DNFBP sectors, the FIC said.
On average, these two sectors’ current RCR submission rate is about 70%, with legal practitioners and estate agents submitting 11 351 and 6 506 RCRs, respectively.
“While the priority risk-based focus is on estate agents and legal practitioners, the other DNFBP sectors, such as high value goods dealers, including dealers in precious stones, and dealers in precious metals (which includes Krugerrand dealers), as well as trust service providers (including accountants), must also substantially and urgently file their outstanding RCRs with the FIC forthwith,” Malan said.
“Critically, RCR submission rates across all DNFBPs must move closer to the 100% mark over the current quarter (April to June 2025) for the FIC to improve its risk-classification for each sector.
“Should we attain a closer to 100% RCR submission rate across all DNFBPs, the better would be our risk assessment and analysis of RCRs per sector to identify more credible numbers of higher risk ratings for businesses and professions, and in aggregate across all DNFBP sectors. This will improve the risk-based selection of higher-risk DNFBP entities for supervisory inspections,” Malan said.
Why the returns are important
RCRs provide an accurate view of sectors’ understanding of their ML/TF risk. In analysing the submitted returns, the FIC can identify, to a granular level, individual businesses that are at risk. This then informs its risk-based supervision, guidance, and awareness content. The starting point is the timeous completion and submission of RCRs, the FIC said.
Directive 6 requires legal practitioners, estate agents, trust service providers, company service providers, and casinos to complete and submit their RCRs online, via the FIC’s website. The due date for these submissions was 31 May 2023.
Directive 7 instructed dealers in precious stones, dealers in precious metals (including Krugerrand dealers), credit providers, and crypto asset service providers to submit RCRs by 31 July 2023.
Although the deadlines have long passed, the FIC’s portal remains open for the submission of RCRs. The relevant accountable institutions can complete and submit the RCRs by clicking here on the FIC’s website.
The FIC urged DNFBPs that have not yet done so to complete and file their outstanding RCRs without delay.
“We are appreciative of the industries and sectors that have submitted their RCRs, but non-compliance by their peers is negatively impacting on these positive steps. All DNFBPs that have not yet done so are urged to urgently complete and file their RCRs with the FIC,” Malan said.
