Property Law

« back

FICA
The Financial Intelligent Centre Act explained

The Financial Intelligence Centre Act incorporates essential elements necessary for a successful anti-money laundering environment. The Act:

• Criminalises money laundering;
• Enables the investigation and prosecution of money laundering;
• Requires financial institutions to implement customer due diligence measures and provide reports to the Financial Intelligence Centre;
• Establishes regulatory and supervisory functions over the manner in which financial and other institutions comply with these obligations;
• Establishes the Financial Intelligence Centre; and it
• Enables various law enforcement authorities to share information and assist in international cooperation.

Other related legislation includes:

• The Drug and Drug Trafficking Act 140 of 1992.
• The Proceeds of Crime Act 76 of 1996.
• The Prevention of Organised Crime Act 121 of 1998 (POCA)

All these acts are intended to prevent and prosecute:

• Money Laundering.
• Organised Crime
• Drug trafficking
• Crimes involving money, such as Tax evasion, fraud, corrupt activities and criminal schemes.

For the crime to succeed, the source of the funds must be hidden or laundered so that the funds appear to be earned as a result of legitimate activities.  The purchase and subsequent sale of immovable property is a method often used to launder ill-gotten gains.

Quite apart from the obligation to establish and identify the identities and addresses of clients, there is an obligation to report to the Financial Intelligence Centre suspicious clients and suspicious transactions.  To do so a form which can be found on the website www.fic.gov.za must be completed and submitted to the Financial Intelligence Centre. 

The penalty for failing to report is very severe.  In doing so, you are prohibited from informing the subject of the report that you are making the report.  The subject may not find it difficult to guess who, in his mind, the culprit is.

In the directors’ report of the Financial Intelligent Centre it was reported that for the year ending February 2006, 19 793 Suspicious Transaction Reports (STR) had been received.  The report does not say how many prosecutions and successful convictions followed.

Facts that may give rise to a suspicion are many and include:

Suspicious Clients:

• A client who provides vague or contradictory information or references.
• A client who has no record of past or present employment or involvement in a legitimate business but who engages in large transactions.
• A client who enters into transactions that do not appear to have a legitimate business purpose.
• A client who purchases a property for cash or a large deposit is put down where the ability of the client to fund such a purchase is suspect.

Suspicious transactions:

• A transaction involving large cash amounts given the profile of the client.
• The payment of commissions or agent’s fees that appear excessive in relation to those normally payable.
• Purchase of commodities significantly above or below market prices.

The Estate Agent generally does not get to know the client’s financial profile and suspicious clients and transactions will be more apparent to Banks and Financial institutions.  It is not surprising therefore that 95% of all Suspicious Transaction Reports are submitted by financial institutions including banks.

It follows that very few Suspicious Transaction Reports are made by Estate Agents who will prefer to refer the matter to the conveyancer to make the difficult decision as to whether to report.

Numerous entities are listed as accountable institutions.  The following is a short list:

• Attorneys.
• Estate Agents.
• Banks and other financial institutions.
• Life Insurance Companies.
• Casinos and businesses operations with gambling licenses.
• Dealers in motor cars and Kruger Rands.

Client Identification and Verification:

These are crucial elements of the money laundering control system.
In terms of Section 21 (1) of FICA an accountable institution may not establish a business relationship or conclude a single transaction with a client unless the accountable institution (in your case the Estate Agent) has taken the prescribed steps:

• To establish and verify the Identity and residential address of the Client;

• If the client is acting on behalf of another person to establish and verify the identity and residential address of that other person and the authority to act on behalf of that other person.
• If another person is acting on behalf of the client to establish and verify the identity of that other person and that other person’s authority to act on behalf of the client.

It becomes apparent that the general rule is that everyone involved with the client and those in  management has to have their identity and residential address established and verified.

The following are the general categories of clients:

• South African citizens and residents. (certified copy of ID and trusted document verifying residence such as a Utility Bill; agreement of lease; telephone account; etc)  If the spouse or co-habitant does not have a trusted document to verify their address, the co-habitant that does will have to sign a co-habitant’s affidavit.)
• Foreign nationals. (as above, except a trusted document is not required.)
• Close Corporations and South African Companies.  All members, directors and offices will have to have their identity and residence established and verified.  The registered office will have to be established and verified by reference to the registered documents.
• Foreign companies.
• Other legal persons.
• Partnerships.
• Trusts.  All Trustees and beneficiaries will have to have their identity and residence established and verified.  The registered address will have to be established and verified by reference to the registered documents.  

South African citizens and residents:

The accountable institution (Estate Agent) must obtain the following particulars in respect of such a client:

• Full names.
• Date of birth.
• Identity Number.
• As far as can be established, the income tax number is not presently required.
• Residential address.

The accountable institution is authorised to verify that a document is a true copy of the original.  Get a rubber stamp:

Verified a true copy of the original
John Patrick Jones.
(add qualifications to make it look official.)

Your Estate Agency has an obligation to keep accurate records which can be inspected.  This is why careful compliance with FICA is essential.

Who is your client:

The simple answer seems to be the seller.  He pays your commission.  However you have an obligation to look after the interests of both the purchaser and seller.  It would be prudent to FICA both Seller and Purchaser.  I have requested a ruling from the Financial Intelligence Centre and will let you know.

You must FICA the client before you enter into a single transaction.

An Estate Agent/client relationship is entered into when you obtain a sole mandate.  It would be totally impractical to FICA the client when you receive a verbal open mandate.  If not taken before, you must FICA the client before the sale is concluded.

It is suggested that the following letter be written to your client.

The provisions of the Financial Intelligence Centre Act, No 38 of 2001 requiring us, as Estate Agents, to establish and verify the identities and addresses of our clients came into effect on the 30th June 2003.  The Act is designed to counter money laundering and Estate Agents have been designated as accountable institutions. 

I attach a questionnaire for completion.  It can be signed before me as I have been appointed to establish and verify the identities of our clients.  To enable me to comply with my duties, please have available as soon as possible, your Identity Document, or if such is not available, your driver’s licence, or current Passport which includes your photograph.  If you are out of town, you will have to sign this questionnaire before an Attorney, Notary Public, Commissioner of Oaths or South African Consular Official.  If none of these are available, please contact me so that I can explore alternatives. 

I must also verify your place of residence and should be please if you would let me have a trusted document which is your water, electricity and/or rates account (Utility Bill) which includes your residential address.  (other documents include a recent bank statement, a lease or rental agreement; a telephone account; a recent mortgage statement; an official tax return; or a recent pay slip).  Any such document must include your residential address. 

If you are married in Community of Property, or buying in co-ownership, or if your marriage is governed by the laws of a foreign country, a separate questionnaire will have to be completed by both (all) of you.  If you are granting a Power of Attorney to a third party to sign documents on your behalf,  that person must also complete and sign the Questionnaire.

If you do not have any trusted document to verify your residential address, a co-habitants declaration will have to be signed by you and your co-habitant (spouse), whose residential address will have to be verified.

You will appreciate that Estate Agents are obliged to ensure that the Financial Intelligence Centre Act is strictly complied with.  We have no discretion and ask your indulgence to ensure that our and your obligations are complied with.