Big changes for FICA and trusts go live in South Africa
National Treasury and the Financial Intelligence Centre (FIC) have implemented new laws that bring changes to international transfers and the administration of trusts.
In a government gazette, the Minister of Finance said that sections 6 and 43 of the Financial Intelligence Centre Amendment Act of 2017 took effect on 18 August 2023.
According to Lerato Lamola, Christopher Williamson from Webber Wentzel, section 6 simply amends the heading of Chapter 3 to the Financial Intelligence Centre Act, 38 of 2001 (FICA), which now reads: “MONEY LAUNDERING, FINANCING OF TERRORISM AND RELATED ACTIVITIES AND FINANCIAL SANCTIONS CONTROL MEASURES.“
The changes to section 43 of the Act are slightly more intricate and amend section 56 of FICA to include subsection (2), which states that:
“(2) An accountable institution that fails to report to the Centre the prescribed information in respect of an electronic transfer of money in accordance with section 31, is non-compliant and is subject to an administrative sanction.”
Section 31 of FICA – in conjunction with Regulations 23D and 24(5) of the Money Laundering and Terrorist Financing Control Regulations – states that an accountable institution must file an international funds transfer report (IFTR) with the Financial Intelligence Centre (FIC) when sending R20,000 or more out of the country on behalf of someone else.
The IFTR must be sent to the FIC within three days of the transaction and must also include specified particulars named in Regulation 23E.
“A failure to file an IFTR in accordance with these provisions constitutes an offence, for which any person or institution, on conviction, could face imprisonment for up to three years or a fine of up to R1 million,” the experts said.
“Any person or institution who fails to file an IFTR within the prescribed period is regarded as non-compliant and will be subjected to an administrative sanction. This sanction may include financial penalties of up to R10 million for natural persons and R50 million for legal/ juristic persons.”
The amendments are aimed at improving South Africa’s anti-money laundering and counter-terrorist financing laws, which have been in the spotlight since South Africa’s greylisting in February this year.
The official government gazette can be found below:
Changes to trusts and company service providers (TCSPs)
In addition, the FIC published Public Compliance Communication No. 6A – Guidance on trust and company service providers as Item 2 in Schedule 1 of the Financial Intelligence Centre Act, 2001 – which updates the definition of TCSPs in FICA.
A TCSP is defined in Schedule 1 of FICA as:
- “(a) A person who carries on the business of preparing for or carrying out, transactions for a client, where –
- the client is assisted in the planning or execution of –
- the organisation of contributions necessary for the creation, operation or management of a company, or of an external company or of a foreign company, as defined in the Companies Act, 2008
- the creation, operation or management of a company, or of an external company or of a foreign company, as defined in the Companies Act, 2008; or
- the operation or management of a close corporation, as defined in the Close Corporations Act, 1984 (Act 69 of 1984.)
- the client is assisted in the planning or execution of –
- (b) A person who carries on the business of –
- acting for a client as a nominee as defined in the Companies Act, 2008 (Act 71 of 2008); or
- arranging for another person to act for a client such as a nominee.
- (c) A person who carries on the business of creating a trust arrangement for a client.
- (d) A person who carries on the business of preparing for or carrying out transactions (including as a trustee) related to the investment, safekeeping, control or administering of trust property within the meaning of the Trust Property Control Act, 1998 (Act 57 of 1988).” (own emphasis)
Any person who does one or more of the activities from the above list is seen as an accountable institution and must follow the accompanying obligations.
In addition, PCC 6A states that someone appointed to provide TCSP functions in their personal capacity and not on a commercial basis is not required to register as a TCSP.
Offering a TCSP service as part of the person’s service offerings to clients, irrespective of the number of clients, is seen as being provided on a commercial basis.
Additionally, in terms of trusts, the word “trust” in item 2 of Schedule 1 includes those created by parties and both local and foreign trusts.
However, trusts created by the following groups are excluded from this item:
- a testamentary disposition (mortis causa);
- a court order;
- a person under curatorship; or
- the trustees of a retirement fund in respect of benefits payable to the beneficiaries of that retirement fund
“It should also be noted that a person could perform either one or a combination of the four TCSP business activities in Item 2,” the experts said.
“If that person meets the definition of multiple business operations, they must register on the FIC’s registration and reporting platform as either a “company service provider” or a “trust service provider” or both.”
“If a person is registered with the FIC as an accountable institution, under a different Schedule 1 item, and in addition performs the functions of a TCSP, they would be required to register additionally with the FIC as an Item 2 TCSP. This is referred to as dual registration.”
Public Compliance Communication No. 6A can be found below:
Read: 5 new laws being finalised for South Africa – including changes to taxes and pensions
Loading ...
