The National Council of Province’s Select Committee on Finance has processed the amendments to the schedules to the Financial Intelligence Centre Act (Fica), despite National Treasury and the National Clothing Retail Federation of South Africa (NCRF) not seeing eye to eye on the blanket inclusion of credit providers.
Read: Clothing retailers, Treasury deadlocked over making all credit providers accountable institutions
The amendments to Schedules 1, 2 and 3 have already been processed by the National Assembly’s Standing Committee on Finance.
The draft amendment of Item 11 of Schedule 1 will make a wider sector of credit providers accountable institutions.
The NCRF submitted that the amendment would result in the exclusion of a large segment of consumers from access to credit because they would not be able to provide proof of residence. It would also result in higher compliance costs.
The NCRF proposed a carve-out that would exempt credit providers that provide credit facilities in the form of retail store cards from becoming accountable institutions.
The request for a carve-out was opposed by the FIC and National Treasury, which said that including credit lending was non-negotiable under the Financial Action Task Force’s standards, and a carve-out would create a precedent that could lead to many other requests for carve-outs in other areas.
The Select Committee adopted its report on the amendments this month.
Among other things, the committee said it noted:
- The FIC’s submission that, following the amendments to Fica in 2017, accountable institutions should not apply a one-size-fits-all approach but a differentiated one in line with the FATF standards of 2012, which require that businesses should manage their own risk.
- National Treasury “repeatedly” gave the assurance during the hearings that accountable institutions will be required to adopt a risk-based, not a rules-based, approach.
- The submissions from the FIC and Parliament’s senior legal adviser that the amendments to the schedules could not be referred to the Constitutional Court at this stage. The only way in which the constitutional validity of a specific item in the schedules could be challenged is if a litigant has the standing to mount such a challenge once the item has been adopted.
- Although credit providers’ requirement for consumers to produce proof of address might exclude a large segment of consumers from access to credit – to which the committee was opposed – this was not a Fica or FATF a requirement, and the FATF standards did not prescribe the documents required.
- Although the committee recognised the concern that compliance with the proposed amendments might be costly, time-consuming and labour-intensive, it did not believe the NCFR had adequately substantiated the nature of additional information that registered credit providers will have to obtain, or the additional costs of compliance as a result of the implementation of the proposed amendments.
- The cost of not complying with the FATF requirements will have far more negative consequences, whereas the cost of compliance “will be far less than portrayed”.
The report said despite National Treasury’s view that the amendments should not result in additional costs of compliance, beyond credit providers’ obligations in terms of the National Credit Act, consumers often bore a disproportionate share of the cost of compliance. The committee therefore recommended that Treasury and the FIC monitor the cost of implementing the amended schedules, particularly for consumers, and report back on this, as well as the progress with implementing the amendments, within the next 18 months.
The committee also expressed its “severest disapproval” of Treasury’s failure to bring these “very important and urgent” amendments sooner to Parliament.
