Schedules 1 and 3 of the Financial Intelligence Centre Act 38 of 2001 (“FICA”) were amended during December 2022 to include High Value Goods Dealers in the definition of ‘accountable institutions’. A transition period for the amendments was granted for 18 months, which has come to an end in June 2024.
High Value Goods Dealers as ‘accountable institutions’
Schedule 1, Item 20 of FICA describes a High Value Goods Dealer as a person (legal or juristic) who carries on the business of dealing in high-value goods in respect of any transaction where such business receives payment to the value of R100 000.00 or more, whether from a single transaction, or through a series of transactions linked to one another. Examples of such goods may include jewellery, artwork, metals, gems, and antiques. Important to note is that even if payment of the funds for the high-value item is made in instalments, the dealer will still fall within the definition of an ‘accountable institution’.
One of the principal objectives of FICA is to combat money laundering activities and financing of terrorist and related activities. High Value Goods Dealers are often a target of these activities, as the purchasing of high-value items is often used in money-laundering schemes and financial crime. The amendments have been introduced to further achieve FICA’s objectives.
How will the amendments affect High Value Goods Dealers and their prospective clients?
High Value Goods Dealers must now ensure that their businesses are fully compliant with FICA. Where a transaction is above the R100,000.00 threshold, or below the threshold but the dealer believes that the customer or purchaser requires FICA verification, the dealer must take the usual steps prescribed by FICA for ‘accountable institutions’.
Section 21 of FICA, which deals with the identification of clients and other persons, requires ‘accountable institutions’ to conduct due diligence for a single transaction or to establish a business relationship with a client by:
- Verifying the identity of the prospective client;
- Identifying the authority of the prospective client if they are acting on behalf of another person; and
- If the prospective client acts on behalf of another person, verifying the identity and authority of that person.
An accountable institution may not engage with a client who is anonymous or operates under a false or fictitious name.
If the High Value Goods Dealer is dealing with the client on a regular basis so that a business relationship is formed, then the dealer must go further and enquire as to the source of the funds expected to be used in the transaction by the client, and whether any political exposure of the prospective client exists. The dealer also has the responsibility to report any suspicious transactions or receipt of the proceeds of unlawful activity or offences to the Financial Intelligence Centre.
These steps only form a basic overview of the procedures that must be put in place by High Value Goods Dealers when entering into a transaction or related transactions amounting to R100,000.00 or more. Dealers are advised to consider consulting with an attorney to ensure full compliance with FICA and the Regulations.
How can High Value Goods Dealers become compliant with the latest amendments?
All High Value Goods Dealers must be registered as ‘accountable institutions’ with the Financial Intelligence Centre. Further, dealers must have a designated FICA compliance officer, and must develop certain protocols to support risk and compliance management for their business.
Furthermore, dealers must conduct more frequent customer due diligence, and implement a framework within their businesses to account for and report on the due diligence conducted on prospective and existing clients that transact with the business on a regular basis.
As accountable institutions, High Value Goods Dealers are also required to educate and provide ongoing training for their employees on the FICA requirements for high-value goods transactions to ensure compliance and prevent any penalties imposed by the Financial Intelligence Centre.
Speak to our knowledgeable attorneys
For expert advice on FICA compliance, speak to our Cape Town-based Regulatory Law team at Abrahams & Gross.
For Regulatory Law expertise
Henno Bothma henno@abgross.co.za
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The articles on these web pages are provided for general information purposes only. Whilst care has been taken to ensure accuracy, the content provided is not intended to stand alone as legal advice. Always consult a suitably qualified attorney on any specific legal problem or matter.