Estate agents are among those noted by the FIC. (Martin Barraud/ Getty Images)
- The Financial Intelligence Centre has accused some legal practitioners and estate agents of “wilful non-compliance” by not submitting risk reports.
- The centre says these businesses are “dismantling and disrupting” SA’s effort to exit the Financial Action Task Force’s grey list.
- Institutions that do not submit reports risk being targeted for inspections or fines.
- For more financial news, go to the News24 Business front page.
The Financial Intelligence Centre (FIC) has again warned that some legal practitioners, estate agents, and dealers in precious stones and metals are “wilfully standing in the way” of South Africa’s exit from a global financial watchdog’s grey list.
The centre, which analyses and interprets financial data to combat money laundering, said it has started to issue notices of intention to fine uncooperative businesses.
“These businesses are dismantling and disrupting South Africa’s efforts to exit the grey list and improve the country’s standing in the world economy,” said Christopher Malan, the FIC’s manager for compliance and prevention in a statement. “Remaining on the grey list can impact the lives of ordinary citizens, as well as a broad range of businesses, and the economic future of the country as a whole.”
In March 2023, a month after the greylisting, the centre directed all casinos, lawyers, estate agents, trust service providers, and dealers in precious stones and metals to promptly complete a risk and compliance return, or RCR, questionnaire. These businesses are known as designated non-financial businesses and professions, or DNFBPs.
When South Africa was greylisted by the Financial Action Task Force (FATF) in February 2023, it warned that DNFBPs were at high risk of being misused to hide and funnel illicit funds. South Africa urgently needed to tighten oversight and identify firms most at risk, it said.
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The FIC said the questionnaire would help the centre identify which institutions were most at risk of money laundering and terrorist financing. Higher-risk businesses may be subject to in-person inspections.
The initial due date for all submissions was 31 May 2023. But 14 months later, the FIC is still waiting for outstanding submissions from all sectors except casinos.
The centre already warned back in February that estate agents and legal practitioners were not complying, saying it sent a “terrible message”. And while compliance rates have improved somewhat, they are still far below expectations.
Only 60% of legal practitioners and 66% of estate agents have submitted reports, the FIC said this week. In February, the rates were 60% and 55% respectively. This means that few, if any, legal practitioners had submitted reports over the past five months.
Compliance rates for trust service providers and company service providers were at 74% and 76%.
The FIC is also still waiting for feedback from dealers in precious metals and stones, credit providers, and crypto asset service providers, who were given until 31 July 2023 to submit their responses.
This lack of compliance is hindering South Africa’s exit from the grey list, said the FIC. At the FATF’s most recent meeting in June, it again warned that DNFBPs needed to increase their response rates.
“There appears to be wilful non-compliance by businesses in these sectors, despite repeated calls and appeals for them to complete and submit their long-outstanding RCRs to the FIC,” said Malan.
“Institutions that have still not submitted their RCRs are considered delinquent and are automatically deemed to be at high risk of being used for money laundering and terrorist financing purposes. These institutions now face targeted inspections or sanctions for their non-compliance.”
Treasury has eyed mid-2025 as the date for South Africa finally to exit the grey list, which it hopes will provide a boost to the country’s struggling economy.
