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On 14 February, the Financial Intelligence Centre, the FIC, sounded a warning that South Africa’s removal from the Financial Action Task Force (FATF) grey list is in jeopardy due to non-compliance with reporting requirements – primarily by the legal profession and estate agents.
The FIC’s executive manager for compliance and prevention, Christopher Malan, pointed out that two of the Financial Action Task Force’s 22 directives to South Africa are now at risk of failure due to ongoing non-compliance from these two sectors.
The directives in question – it’s a bit technical – are Directive 2A, requiring identification of high-risk entities, and Directive 2B, which requires investigation of these entities. I’m sure our listeners and readers know about the whole issue of South Africa featuring on the grey list. A lot of it is related to money laundering and taking the right protection to ensure better governance in South Africa and globally.
Read: SA marks one year on the FATF grey list
Rawson Property Group issued a call to action on the matter last week, largely quoting its MD Tony Clarke in a media release. He called for the real estate industry to address the situation.
On this latest episode of The Property Pod, SA’s premier property investor podcast, talking us through the issue further is the compliance manager of Rawson Property Group, Charmaine Truter.
Highlights of her interview appear below. You can also listen to the full podcast above or download it from iono, Spotify or Apple Podcasts.
The South African flag adds colour to a residential building. Image: Shutterstock
Highlights
Charmaine, how bad is the situation? I understand the industry needs to comply by May this year for South Africa to become eligible to come off that grey list.
“Yes. It’s very difficult to know how bad the situation really is. They mentioned that only 43% of property practitioners and 50% of legal practitioners, including conveyancers, had submitted their RCRs [risk and compliance returns] to the FIC. But it’s tricky to really know what that is.”
“For me, definitely the bigger [real estate agency] brands, I’m sure, are getting out there and getting their franchises and their branches and all their estate agencies to comply. It seems to be maybe that there are some small independent agencies, maybe in the outlying areas, that just don’t know yet and are not apprised of the FIC, and don’t know what their requirements and obligations are. So it’s difficult to say at this point. I feel pretty confident about Rawson – we’ve been on it.”
It seems like it’s more bureaucracy for our real estate sector to deal with, but we have to deal with it. Where is the real estate sector falling short?
“Well, the Financial Intelligence Centre has actually done amazingly; they have been amazing in their communications, and if you are registered with them – which is what should have happened back in 2016 and then there was a re-registration on their new platform in 2017 – they send literally weekly communications.”
“So they [the FIC] really are trying to get the word out there and explain what the FIC obligations are.”
“I just think that what’s happened with the estate agency industry is that we are so busy with our day-to-day work, trying to make our bread for our table to eat and to make our income, that we are forgetting that there are some statutory compliances that are very, very important. So we are falling short in the sense that we are not actually aware of our statutory obligations in terms of the Financial Intelligence Centre Act.”
Accountable institutions
“We are not understanding that we have been identified as an accountable institution, [along] with the legal profession, and therefore we have to register with the FIC, and we have to set up a compliance programme; we have to identify and verify all our clients and then report suspicious transactions and all sorts of cash-threshold reports to the FIC.”
“It is very onerous, but it is very, very important at the same time …”
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Read:
Can SA remove itself from the dreaded grey list by early 2025?
South Africa eyes exiting FATF grey list in 2025
The implications for SA now that it’s on FATF’s grey list
What are the risk and compliance returns [RCRs]? How onerous are they and is it quite a hectic process to deal with in terms of filing these forms or submitting them to the FIC?
“The risk compliance return is not onerous in [terms of being] difficult to complete. It’s not difficult to complete. It’s just 176 questions. It’s a questionnaire which you do online, on their platform. They try to make it as easy as possible.
“The questions are not difficult, but they sometimes are a bit ambiguous. And so it’s more just time-consuming and a bit of a burden, an onerous burden to do administratively.”
“But there are plenty of resources available on the FIC website. Also, Rebosa [Real Estate Business Owners of SA] has become involved and we as Rawson, as a brand, have done extensive training and guidance to assist our franchises on how to answer these questionnaires.
“We can’t do it for them, but we definitely have tried to help them. In fact, this week … [on Tuesday 27 February], the FIC is going to hold free webinars to explain to agents that haven’t done it yet how to fill in their compliance, their RCR.”
Listen:
Treasury on why stabilising public finances is key for growth
What progress has been made to get SA off the grey list?
Impact of the Property Practitioners Bill on the real estate industry
How is the group dealing with the situation as Rawson, and do you believe the sector will comply by May?
“Well, I’ve been with Rawson now for almost eight years, so right from the beginning, 2015, we were very much on top of what our FIC obligations were, and we are very strict. As soon as we have any communication from the FIC, we send out group communications. We’ve set up infrastructure and templates and guidance notes; we do webinar trainings. We’ve brought in legal experts as well, just to give our franchises proper webinar training on what our FIC obligations are.”
“So we’ve really tried, with all the revenue and the resources that we have, to assist from the Rawson brand group, and I think that we’ve done a really good job.”
“My point of view is I think that we will be able to get this done by May. Absolutely. We just need to pull together the whole sector now …
“Maybe fill in the gaps where there isn’t a brand like Rawson, and help others that are on their own – small, independent franchises – and give them the tools. It’s a matter of just educating and saying this is what you have to do. Once you know what to do, you just have to do it. It’s not difficult.”
Do you have any insights into what possible penalties or fines non-compliant companies in the sector could face if that is not submitted in time?
“Well, they’re saying that it’s an administrative sanction, and that can include a financial penalty. As for the sanctions, what is difficult is they’ll say it’s in proportion to the nature and the seriousness and the extent of whatever non-compliance it is.”
“It can include a caution; it can include a reprimand from the FIC, and it can include a directive for the agency to do remedial action. It can include a restriction or suspension of business activities. And so, there is a very big threat of financial penalty of up to R10 million for a natural person and R50 million for a legal person …”
Listen to the full episode here.
You can also listen to previous episodes of The Property Pod here.
