The name of the relevant legislation itself – The Financial Intelligence Centre Act, 38 of 2001, as amended – is enough to instil a feeling of fear and trepidation in the mind of a rational individual. Next moment, the estate agent appears on your doorstep with a checklist requiring all sorts of highly personal information from you. The agent is there because the admin manager in the office has indicated to the agent that no commission will be paid unless both buyer and seller have been correctly “FICA’ed”.

The Financial Intelligence Centre is the national body responsible for the gathering, analysis and dissemination of financial intelligence. The main purposes of this process are to identify the proceeds of crime, and to combat money laundering and the provision of funding for furthering acts of terrorism.

The basic principle is that any person or company dealing in a financial transaction is required by law to identify and understand their client to the extent that they are able to declare that the proceeds received for the transaction in question are not likely to have been obtained in the commission of a crime; alternatively, that the proceeds from the transaction are unlikely to be utilised to fund any acts of terrorism – which is also defined.

The people reading this who have been living in the same house for the past 10 years and have decided to downscale in anticipation of retirement or upscale as their family grows, often ask why on earth we would require this information from them. The principle to remember is, however, that in order to apprehend the minority who commit crimes you have to apply the same rules and regulations to everyone.

The people responsible for financial crimes often look no different to the average man or woman in the street. Notwithstanding the scientific techniques used to identify criminals, there is no “profiling” which could be applied to identify shady individuals. What sets them apart is that they often have more money than their status in life would suggest they should have. By questioning (for example) the sources of funds and asking where the capital that they are about to invest in a home was raised, early warnings of potential problems are timeously identified.

The use of property transactions for money-laundering purposes necessitates an understanding of this “cleaning” process. Dirty money (or money earned from criminal activities) has to be laundered so as to alter its identity. Other countries may not be as vigilant as South Africa when it comes to the transfer of funds outside the country. If that money is invested in a property which is subsequently sold, the proceeds from the sale will now appear to be clean money.

By undertaking the know-your-client exercise, the vigilant estate agency will be able to pick up possible irregularities. For example, foreigners investing in property in South Africa will usually have a bank recommendation letter or something of that nature which vouches for the client. Were the proverbial “suitcase of money” to be produced as part of any acquisition, that would however under normal circumstances be regarded as unusual and hence reportable.

All estate agencies have to follow a process commencing with registration of the entity with the Financial Intelligence Centre, the appointment of a compliance officer, training of all the staff, and ultimately the creation of a proper risk management compliance programme. What happens in practice is that any cash transactions in excess of R 24 999.99 have to be reported, and any other transactions that the estate agency in good faith considers to have an element of risk involved.

Alternatively, if the estate agency is not able to satisfy themselves as to the validity of any element of the transaction, this also has to be reported. Reporting by its very nature is merely flagging a transaction for inspection by the authorities, and in no way implies that the estate agency is doubting the credibility of the parties, but where there is any doubt, better safe than sorry is the correct approach.

So the next time an estate agent asks you for the FICA documents, please be so kind as to assist as soon as possible. The fines that can ultimately be imposed on the estate agency for non-compliance are significant, and no compliance officer really wants to experience the food in a place of incarceration!

The views expressed above are those of the writer in his personal capacity and may not necessarily reflect the views of Fine & Country as a national and international brand.

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