SA's removal from the Financial Law Task Force (FATF) gray list is in jeopardy mainly due to non-compliance with reporting obligations by law practitioners' offices and real estate agents. Both have been identified as high-risk categories for money laundering and money laundering. Terrorist financing.
The Financial Intelligence Center (FIC) has been given a deadline of May 2024 by the FATF to demonstrate enhanced supervision of so-called designated non-financial operators and professionals, such as real estate agents, lawyers, and dealers in precious metals and gemstones. It is being
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This will depend on whether the FIC meets a May deadline for “risk-sensitive” companies to report on their compliance with the FATF.
Risk and compliance reporting
Christopher Mullan, head of compliance and prevention at the FIC, warned in a media presentation on Wednesday that penalties will be imposed on delinquent companies that do not submit risk and compliance reports as required by the FATF.
Only 52% of the approximately 16,000 law firms in the country submitted risk and compliance reports. Compliance levels among SA's approximately 9,000 real estate agents were as low as 42%.
Malan said casinos are also required to submit risk and compliance reports, but there are only 38 casinos in the country and they are relatively well supervised.
The FATF's expected compliance rate is 100%, or “close to 100%,” Malan added.
The FIC has eight reporting deadlines in May, and failing to do so “will send it off a cliff,” Malan said. This means the country's credibility will be damaged at a time when the FIC is trying to remove it from the gray list.
“There is a growing awareness that business will be disrupted if the May deadline is not met.” [in SA] Locally and internationally, it is seen as not taking its responsibilities seriously. We have no control over that. Businesses have their reputations at stake,” Malan said.
Alarm issued
The FIC has already started issuing warnings and notices to delinquent companies, and the next step will be to impose fines, which could reach millions of rands.
The FIC has wide discretion in the size of penalties to impose, and this will be assessed on a case-by-case basis. Mr Malan said late reporting would result in a fine of approximately R50,000.
The May 2024 deadline is one of several FATF-imposed deadlines by January 2025. By this time, SA is expected to demonstrate a continued increase in serious and complex money laundering investigations and prosecutions, particularly those involving professional money laundering operators.
“We don't want to miss any deadline and are appealing to the business community to deliver on their commitments. But in the meantime, we need serious work,” Malan added.
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Risk and compliance reports often require companies to provide detailed information required by other regulatory bodies, such as corporate structure, number of branches, number of employees, revenue, and operations. Risk reporting requires information about perceived risks within the company, details of politically exposed individuals, staff training, and reporting on suspicious cash transactions.
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High risk category
Two new categories added to FIC compliance monitoring are Enterprises and Trust Service Providers.
According to the FIC, around 1,000 service providers are registered with the FIC and compliance is currently running at around 45%.
All “responsible institutions” (as defined in the FIC Act) are required to register with the FIC and submit their reports electronically. Once registered in the FIC database, companies receive regular notifications and updates regarding terrorist financing.of schedule The proportion of responsible institutions has recently been updated to include several new categories, including co-op banks, people carrying on the business of credit providers and money transfer operators, virtual currency exchanges, and dealers of high-value goods.
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The FIC says its main concerns are two high-risk categories: law firms and real estate agents.
“How committed are these two groups to solving and combating money laundering? This could have reputational implications domestically and internationally,” Malan said.
“We cannot accept this level of non-compliance and therefore we must initiate sanctions.”
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