A wide range of non-financial businesses now have compliance and reporting obligations in terms of the Financial Intelligence Centre Act (Fica). If you sell items valued at R100 000 or more, this law may apply to your business.
On 19 December 2022, a new category was added to the list of accountable institutions in Schedule 1 of Fica as one of the steps to address gaps in South Africa’s anti-money laundering and combating the financing of terrorism legislation. This new category is called a “high-value goods dealer” (HVGD).
Item 20 in Schedule 1 says a HVGD includes “a person who carries on the business of dealing in high-value goods in respect of any transaction where such a business receives payment in any form to the value of R100 000 or more, whether the payment is made in a single operation or in more than one operation that appears to be linked, where ‘high-value goods’ means any item that is valued in that business at R100 000 or more”.
This definition is intended to cover a wide range of trading activity, including dealers in antiques, collectibles, fine art, boats, aircraft, and motor vehicles where the value is equal to or more than R100 000, said law firm Webber Wentzel.
Based on preliminary guidance from the Financial Intelligence Centre (FIC), it said this category of accountable institution also includes dealers in precious metals, precious stones, and diamonds.
The Precious Metals Act defines a “precious metal” as:
- The metal gold, any metal of the platinum group, and the ores of such metals; and
- Any other metal that the Minister of Mineral Resources and Energy has declared by notice in the Government Gazette to be a precious metal for the purposes of this Act, and the ores of any such metal.
Important aspects of the definition
Webber Wentzel said it is important to note the following aspects of the definition of HVGDs:
- A high-value good must be a physical/tangible/movable item;
- It can be a new and/or second-hand item;
- The trading activity relates to any trading of physical items to the value of R100 000 or more as part of the entity’s ordinary course of business;
- A payment of R100 000 or more is received for the physical item; and
- Dealing includes trading, selling, or buying, with a focus on the retail sector, where the risk of financial crime is high.
The following list of trading entities is included in the FIC’s Draft Public Compliance Communication 119:
- Krugerrand dealers;
- Any dealer who regularly deals in jewellery, ornaments, watches, or objects that contain Krugerrands;
- Motor vehicle dealers;
- Dealers in precious metals and precious stones (including all metals declared by notice to be a precious metal);
- Second-hand dealers in precious metals and stones (including gold, iron ore, platinum and copper);
- Diamond dealers;
- Antique dealers; and
- Fine art dealers.
The draft PCC is not final. Before the FIC issues the final guidance, it published a draft on which it invited submissions. These submissions were due by 20 January. Section 4(c) of Fica empowers the FIC to provide guidance in relation to matters concerning compliance with Fica, and this must be considered when interpreting the provisions of Fica.
Compliance obligations
The following obligations are imposed on accountable institutions in terms of Fica.
An accountable institution must:
- Register with the FIC as soon as possible.
- Develop and implement a risk management and compliance programme (RMCP). A RMCP deals with an institution’s processes and procedures to comply with its Fica obligations by following a risk-based approach.
- Implement customer identification and verification processes, and conduct customer due diligence.
- Appoint a compliance officer and in some cases, money-laundering reporting officers.
- Regularly train employees on Fica
Sanctions for non-compliance
The FIC or another supervisory body may impose an administrative sanction on any accountable institution to which Fica applies when it is satisfied on available facts and information that the institution or person has failed to comply with a provision of Fica or any order, determination or directive made in terms of Fica.
- The types of administrative sanctions that may be imposed include:
- A caution not to repeat the conduct that led to the non-compliance;
- A reprimand;
- A directive to take remedial action or make specific arrangements;
- A restriction on specified business activities; or
- A fine not exceeding R10 million for a natural person and R50m for a legal person.
