The Financial Intelligence Centre (FIC) has accused estate agents of "wilful non-compliance" for failing to submit required risk reports.
According to the centre, these actions are "dismantling and disrupting" South Africa's efforts to exit the Financial Action Task Force's grey list.
The centre, which analyses and interprets financial data to combat money laundering, has begun issuing notices of intention to fine non-compliant businesses.
Certain designated non-financial businesses and professions (DNFBPs) continue to ignore directives from the Financial Intelligence Centre (FIC), obstructing South Africa's efforts to exit the Financial Action Task Force (FATF) grey list, it said.
At the FATF plenary in June, South Africa reported its progress in addressing deficiencies in its measures for combating money laundering (ML) and terrorist financing (TF).
While FATF acknowledged the FIC's progress in understanding DNFBP risk levels through the introduction of the risk and compliance return (RCR) questionnaire, concerns remain over the low submission rates of RCRs by DNFBPs. FATF emphasized the need for increased response rates from these accountable institutions.
The RCR is a questionnaire that assists businesses in identifying the risks they face regarding ML and TF abuse.
The FIC uses its Risk and Compliance Assessment Analysis tool to evaluate the RCRs, identifying higher-risk DNFBPs and informing its supervisory approach, including inspections on high-risk entities.
In March 2023, the FIC said it issued Directive 6, calling upon legal practitioners, estate agents, trust service providers, company service providers, and casinos to complete and submit their RCRs online by 31 May 2023.
The average RCR submission rate across affected Directive 6 sectors is 63%, with individual sector submission rates as follows:
Legal practitioners: 60%
Estate agents: 66%
Trust service providers: 74%
Company service providers: 76%
Casinos: 100%
The FIC said it has reiterated to these sectors, excluding casinos, that non-submission of RCRs places them in a state of non-compliance, risking administrative sanctions.
The current low response levels hinder the country's progress in addressing the FATF-identified deficiency that DNFBPs cannot identify their ML and TF abuse risks.
Due to this non-compliance, the FIC said it has already begun issuing notices of intention to sanction, sanctions, and fines.
Additionally, in March 2023, the FIC said it issued Directive 7, instructing 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. Submissions from these sectors are still outstanding.
The continued disregard for compliance with Directives 6 and 7 remains a major obstacle to South Africa's efforts to exit the grey list, despite these sectors being identified as the most vulnerable to ML and TF abuse.
“There appears to be wilful non-compliance by businesses in these sectors, despite repeated calls and appeals for them to complete and submit their long outstanding RCRs to the FIC,” said Christopher Malan, executive manager for compliance and prevention at the FIC.
“Institutions that have still not submitted their RCRs, are considered delinquent institutions and are automatically deemed to be at high risk of being used for money laundering and terrorist financing purposes. These institutions now face targeted inspections or targeted sanctions their non-compliance.
“Over and above this, these businesses are dismantling and disrupting South Africa’s efforts to exit the grey list and improve the country’s standing in the world economy.
"Remaining on the grey list can impact the lives of ordinary citizens, let alone a broad range of business and the economic future of the country as a whole.”
The FIC said it has already embarked upon issuing notices of intention to sanction, aimed at remediation and payment of fines as admission of non-compliance.
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