With the compliance deadline for the Financial Intelligence Centre (FIC) Amendment Act fast-approaching, estate agents are becoming increasingly apprehensive as they have yet to receive implementation guidance and clarity about its implications for the industry.
According to Jill Lloyd, Southern Suburbs Agent for Lew Geffen Sotheby’s International Realty industry professionals are becoming increasingly apprehensive as the broad scope of stipulations and mechanisms required by the new act are expected to take considerable time – and expense – to implement.
“At the moment we have more questions than answers and smaller or low-commission agencies especially could really struggle to achieve compliance by 1 April 2019. We urgently need more information if we are to abide by the law as well as service our clients to the proper standard.”
Craig Guthrie, Partner at Guthrie Colananni Attorneys, explains: “The Act places a responsibility on accountable institutions to not only identify, know and understand their clients, they are also required to conduct a continuous client due diligence that will focus on understanding the business of clients and where and how they get their money.
“These onerous requirements are aimed at combating money laundering, corruption and terrorist financing, but they will also place further pressure on an already beleaguered market as the property industry has unfortunately been identified to carry a risk.
“This is largely because third party payments could happen without the necessary verification of identities of the third party. For example, you might find that a seller has elected to have the purchase price paid over to a relative whose identity is not known to the agent or the conveyancer.
“Therefore, in theory, without realising it, the conveyancer and estate agent could both be aiding and abetting in financing a terrorist, money laundering or corruption.”
In order to comply with the new amendments clients in a property transaction are going to have to disclose the source of their funds and provide supporting documents.
“No-one is exempt,” says Guthrie, “including high risk people such as politically connected persons, foreign public officials or domestic prominent individuals involved in business with government. Their family members and known close associates will also have to provide documentation to verify the source of funds and the activities that generated those funds.
“And if the information is not provided or is unsatisfactory, Section 21E obliges the agent or conveyancer to stop dealing with the party until they have complied as well as report them to the Financial Intelligence Centre.”
Lloyd says: “Property transactions are already laden with reams of documentation at every stage and there are numerous potential pitfalls that can delay or even scupper a deal, and this amendment introduces yet another layer of compulsory engagement with added potential to cause delays or the loss of a sale.
“Estate agents have to do far more than collect data now; they also effectively have to do the government’s job of due diligence – and be able to prove that the info is correct.
“We will have to develop policies and systems to safely store the confidential information and will need to be able to recognise suspicious activity and report it. Additionally, the penalties for non-compliance are massive.”
It is a criminal offence if accountable institutions and individuals do not comply and, upon conviction could face imprisonment of up to 15 years and fines up to R10 million for individuals and R50 million for companies.
Related article: 1 April 2019 is deadline for FIC compliance