South Africa: Cash Threshold Reporting Obligations Imposed by FICA

Last Updated: 28 September 2010
Article by Marelise Van Der Westhuizen

On 9 September 2010 the Financial Intelligence Centre confirmed that the cash threshold reporting obligations imposed by the Financial Intelligence Centre Act, 2001 ("FICA") will come into operation this year. This marks yet another step in the Government's plan to implement strict anti money laundering and anti terrorist control measures in South Africa.

Attorneys, motor vehicle dealers and casinos may be required to file cash threshold reports ("CTR's") with the Centre in terms of section 28 of FICA from 4 October 2010. They must report cash transactions (cash includes travellers cheques) above R25 000-00 going through them. Section 28 of FICA was enacted in 2001 but its anticipated date of commencement, at least insofar as attorneys, motor vehicle dealers and casinos are concerned, has been postponed twice.

The Financial Intelligence Centre ("the Centre") has indicated that the remaining accountable institutions and reporting institutions (which include banks, foreign exchange dealers and estate agents) will be required to file CTR's with effect from 1 December 2010. This date coincides with the presently anticipated date of commencement of the Financial Intelligence Centre Amendment Act ("the Amendment Act") which was signed into law in August 2008.

The Amendment Act, which embodies a comprehensive review of the current anti money laundering regulatory regime will significantly affect all accountable institutions and supervisory bodies.

The amendments to FICA seek to strengthen the powers of the Centre and supervisory bodies to monitor, supervise and enforce compliance with FICA. The Centre will, for example, acquire the power to issue a written directive to any category of accountable institutions "or other person to whom the provisions of FICA apply" regarding the application of FICA. The Centre will be empowered to issue a written directive to any such institution, within the period specified in the directive, for example, "to cease or refrain from engaging in an act, omission or conduct in contravention of FICA" or to "perform acts necessary to remedy an alleged non-compliance with FICA". The costs incurred in complying with a directive are borne by the accountable institution. The Director of the Centre or the head of a supervisory body may also appoint any person in the service of the Centre or supervisory body, or any other suitable person, as an inspector to undertake inspections of any premises at which the Centre or a supervisory body reasonably believes the business of, for example, an accountable institution is conducted. Such inspection can take place at any reasonable time and on reasonable notice. No warrant will be required for purposes of the inspection. The powers of the inspector include the power to order any person who has any document in their possession or under their control relating to the affairs of the accountable institution to produce the document or to furnish the inspector with information in respect of the document and to examine or make extracts from or copy the document. The inspector also has the power to seize any document. The expense of conducting the inspection may be recovered from the accountable institution concerned.

The most far-reaching power afforded to the Centre and supervisory bodies is the ability to impose administrative sanctions on accountable institutions which they consider "appropriate" pursuant to an inspection or when satisfied on available facts and information that the institution or person has, for example, failed to comply with a provision of FICA or has failed to comply with a directive issued in terms of FICA. The administrative sanction may be imposed once the institution or person has been informed in writing of the nature of the alleged non-compliance, the amount or particulars of the intended administrative sanction and once the institution or person has been called upon, in writing, within a period specified in the notice to make representations as to why the administrative sanction should not be imposed. The administrative sanctions include significant financial penalties (not exceeding R10 million in respect of natural persons and R50 million in respect of any other legal person), directives to take remedial action and the restriction or suspension of certain specified business activities. Whilst an accountable institution may appeal against the imposition of an administrative sanction (the members of the appeal board are appointed by the Minister of Finance) the appeal will not suspend the imposition of the administrative sanction.

The Amendment Act was signed into law in August 2008. In August this year the Centre embarked on a consultation process to elicit comments on the proposed commencement date of the Amendment Act (presently 1 December 2010). However, the Centre also published draft technical amendments to the list of accountable institutions and supervisory bodies as a separate but parallel initiative in the legislative review process and invited public comment on those proposed changes. The outcome of the consultation process is eagerly awaited. In the meantime, accountable institutions and supervisory bodies are urged to ensure that they have the staff compliment, funding, facilities and know-how to comply with their additional powers and duties imposed by the Amendment Act and the cash threshold reporting obligations.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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