FICA law in the spotlight after property sales to politically exposed nationals

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A probe into property sales by one of SA’s biggest estate agents highlights the importance of conducting thorough KYC processes in line with FICA legislation.

For businesses that deal with the provision of financial services in any form, the importance of adhering to the financial laws that govern processes cannot be emphasised enough, with repercussions for non-compliance ranging from huge financial loss, to irreversible reputational damage.

The Financial Intelligence Centre Act, (FICA) which aims to combat financial crimes such as money laundering, tax evasion, and terrorist financing activities, came under the spotlight this week, after one of South Africa’s established real estate players, Pam Golding Properties, allegedly enabled money laundering by facilitating the sale of properties to politically exposed Mozambique nationals.

According to fin24, Pam Golding Properties is being probed by the Estate Agency Affairs Board (EAAB) in a case involving the sale of two properties worth R50 million to the family of former Mozambican president Armando Guebuza, in a transaction which is apparently raised suspicions of money laundering.

“It is alleged that the company may have contravened financial law by not following the legal requirements in the process of selling the properties in Dainfern and Kyalami Estate to the family.”

In what has been described by the EAAB as a “first of its kind”, the investigation will examine whether Pam Golding Properties violated the conditions of FICA, including whether the agency can be identified as an accomplice to money laundering.

While non-compliance to FICA laws specifically comes with its own hefty consequences of 15 years’ maximum imprisonment or a fine of up to R10 million, failure to comply with AML laws and regulations and breaches of financial sanctions can have further dire consequences, on top of punitive fines and criminal charges – such as damaged reputations and sanctioning.

What is FICA?

A pinnacle of South African law when it comes to fighting financial crime, FICA came into effect in 2003 after being introduced two years prior, with the aim of combatting financial crimes such as money laundering, tax evasion, and terrorist financing activities.

More recently, in May 2017, even tighter regulation was introduced with the FIC Amendment Act. Essentially, FICA makes sure that institutions know exactly who they are doing business with – i.e. Know Your Customer, or KYC.

KYC legislation has been introduced in most major financial centres across the globe. Such legislation is driven by recommendations and standards set by the Financial Action Task Force. The objectives of the FATF are to set standards and promote effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system.

pbVerify & SigniFlow have combined their world-renowned technologies and software to create a fully digital, end-to-end FICA system that enables accountable institutions to carry out fully compliant KYC and onboarding processes, seamlessly and digitally – KYCFactory.

Incorporated in our solution, is pbVerify’s Sanctions, PEP and PIP (Politically Exposed and Influential Persons) reporting tool, which enables businesses to manually screen prospective clients and perform enhanced due diligence on anyone, from any country.

Read the latest on our ground-breaking digital KYC & compliance factory, KYCFactory, HERE.

[REFERENCES]  

  1. IOL – Pam Golding is under intense scrutiny
  2. Fin24.com – Pam Golding in hot water over sale of houses to ex-Mozambican president’s family
  3. Fic.gov.za – Anti-Money Laundering and Counter-Terrorism Financing Legislation
  4. Eaab.org.za – Estate Agency Affairs Board
  5. Treasury – The FICA ACT
  6. pbVerify – Introducing the first fully digital end-to-end FICA system
  7. SigniFlow – KYCFactory enables paperless compliance processes