FICA update for Estate Agents
If one ever doubted that estate agents deserve their commission, with effect as from 1st April 2019 any remaining doubt should be scrapped for good.
Reason being that on 1 April 2019 amendments to the Financial Intelligence Centre Act No 38 of 2001 has added way more additional legal processes to be followed before agents are allowed to onboard any new client - buyer or seller.
It is now MANDATORY for ALL estate agents - this includes rental agencies - to introduce a RISK MANAGEMENT AND COMPLIANCE PROGRAMME (RMCP) into their usual FICA verification and identification processes and this is going to add immensely to agents already heavy administrative load - but the heavy administrative sanctions in place for non- compliance, may ensure strict compliance?
There is no question that property transactions are a perfect way for the proceeds of illicit gains to be laundered through the system because of the relatively large sums of money involved. Classic money laundering methods are:
- Trying to pay in cash
- Attempting to hide the name/s of ultimate beneficiaries
- Attempting to purchase anonymously
- Buying "sight unseen"
- Agreeing to pay way over market price
- Attempting at the last minute to cancel the sale and have all proceeds deposited, repaid into a "new" bank account
Qualified agents are trained to be alert to all these tricks but the real problem I foresee is getting buyers and sellers to provide ALL the requested personal information needed by agents before they can enter into a business relationship with them. (The required documentation becomes more involved when dealing with juristic entities).
Without the necessary information, the agent cannot proceed with the client and stands the chance of losing out to an unethical agency prepared to risk everything just to "do a deal".
If a client was to reject working with an ethical agent in favour of working with an agency happy to disregard the legal requirements, one wonders to what extent that agency would protect the overall seller's major asset? (Perhaps the FIC should be alerted?)
An interesting addition to the KYC process is the up-front requirement to run the new clients name through the United Nations Security Council's "list 1267" to ensure the name does not appear on their financial sanction list.
Once the client has signed and returned the MANDATORY questionnaire, a determination as to whether the client poses a low or high risk to the agency needs to be considered. If low risk all's well to proceed however, if considered a high risk, a decision may result in the agency terminating the business relationship and if they feel thinks really do look suspicious, they may decide to report their assessment to the Financial Intelligence Centre.
"Low risk Clients"
The processes to be followed by "Low Risk" clients (as assessed by the agency) are relatively easy to manage however where a client may be classed by the agent as "High Risk" the vetting process becomes far more involved.
"High Risk Clients
- A non- resident needing to bring funds in from offshore to purchase would be seen as high risk.
- FPPO'S - Foreign Prominent Public Officials or their immediate family members or known associates, who in the past 12 months occupied a position for example as;
- Head of state, member of royal family, member of cabinet, senior member of a political party, senior member of a SOE and more.
- DPIP'S -Domestic Prominent Influential Persons or their families or associates.
- Deputy president or deputy, cabinet minister or deputy, premier of a province, Mayor, Leader of a political Party, member of a royal family, a traditional leader, CFO of a national or provincial department or municipality, chief investment officer of a public entity, anyone in a position to sell goods or services to the government( amount yet to be set) and many more!
One wonder whether this list has been prepared following revelations uncovered by the current host of commissions on the go?
The "El Capone" case does come to mind reading the lists above - it's far easier to convict and jail a perpetrator on tax evasion and money laundering that going through the criminal justice system!
The legislation in its current form as far as the estate agency industry is concerned is "fuzzy" to say the least and material guidance from the Estate Agents Affairs Board has not been of much assistance to date.
Rob Mckee (PPRE, MPRE) has been a real estate educator for the past 30 years.