The New FICA Regulations 2022
Category General Information
The New FICA Regulations -
The real estate industry is fraught with risk, justifiably so, that's why it is heavily regulated..
Trading in an industry that is heavily regulated is not necessarily a negative, it does however come with multiple challenges. I have had many conversations with multiple property practitioners and principles regarding the hurdles that need to be overcome in the sales process. One of the current hurdles is the FICA act (Financial Intelligent Centres Act). The act talks to all accountable institutions and at the risk of over simplifying the idea, I would like to look at how this applies to real estate, specifically property practitioners selling residential property.
Whilst the act covers a far broader scope of risk, the specific highlighted challenges within the act talks to 4 primary activities that require attention.
In order of importance:
- Money Laundering / Corruption
- Child trafficking
- Terrorism
- Abalone / Drug Smuggling
Historically accountable institutions were held accountable for all reporting of suspicious transactions and activities. This has now been further extended to the individuals managing the transaction. This makes sense as the opportunity to identify illegal activities exists at the coal face.
Within the broad scope of the act, the property practitioner is as accountable as the institution in the reporting process. It thus stands to reason that the identifying of risk starts with the practitioner on the ground.
The Act does not only look at money laundering and whilst this is a material issue, the extended responsibilities of reporting suspicious activities when dealing with buyers and sellers can make the transaction an onerous one.
Within the scope of the Act, risk management processes are called for within each accountable institution, known as a RMCP document. These must be implemented in the business, setting out the risk assessment process to follow when a transaction is underway. A further extension of the KYC (Know Your Customer) process. This calls for additional detail and risk assessments to be done at the point of sale.
Whilst they seem daunting, the assessment profiling and onboarding of customers is now a legal necessity in real estate and it would be wise be aware of these requirements when working with your property practitioner. Any practitioner worth their salt will actively onboard you seamlessly and if they fail to do so they will be breaking a very serious law that comes with hefty penalties.
Any property practitioner or real estate company that fails to follow these regulations put both themselves and potential clients at risk of the following:
- R100 million fine or;
- 15 years imprisonment
Stay aware and stay safe!
Author: Seeff Blouberg
