The Financial Intelligence Centre Act (FICA) 38 passed into law in 2011 is a mystery to some and a legal pain in the backside to others, says an agent.
Gordon Battersby, director of Just Property Group Academy of Training, says the Act was passed into law in 2011, in an attempt to join the major countries world-wide in combating money laundering.
According to Gordon Battersby, director of Just Property Group Academy of Training, the Act was passed into law in 2011, in an attempt to join the major countries world-wide in combating money laundering.
He says HSBC, one of the biggest and best-known banks in the world, has just acknowledged to ‘most probably’ allowing money laundering from Mexican drug cartels.
This is a very disturbing fact and affects everybody involved in any form of commercial transaction involving banks.
Money laundering is the biggest single industry in the world, where “dirty money” obtained from drug sales, prostitution, human trafficking, illegal gambling and a host of other criminal activities, is “laundered” through legitimate businesses and professions so as to appear to have been legally earned.
This was the main objective of FICA, soon to be followed by a second objective, that of combatting terrorism, he says.
These objectives are supported by the FICA liaising with various law enforcement and intelligence agencies both at home and overseas and exchanging information which is to the benefit of all concerned.
How does FICA impact on the real estate profession?
Government looked at the most likely ways criminals could launder their illegal earnings and identified a number of possibilities, including the buying and selling of immovable property.
They made the real estate governing body, the Estate Agency Affairs Board, a supervisory body as defined in the Act and made it responsible for ensuring that estate agencies, defined as accountable institutions in the Act, were fully aware of their responsibilities to report illegal or suspicious transactions with regard to buying, selling and leasing of immovable property.
Very simply put, the Act requires that estate agents must identify their clients and place of residence before entering into either a single transaction or a business relationship.
These records along with copies of sales agreements, leases and mandates must be kept in a secure environment for a period of five years from the date when the single transaction or business relationship terminates.
The first problem estate agents encounter is identifying who the client is.
Battersby says the Estate agency Affairs Act 112 of 1976 defines the client as being the person who gives a mandate that agents accept, meaning that the seller of immovable property will be the client as he or she will instruct agents to find a suitable purchaser for the property.
Likewise, a landlord instructing an estate agent to find a tenant for his property would also fall into the category of being the client.
The question must be asked as to which of the parties is most likely trying to launder the ill-gotten gains and the answer is glaringly obvious - it will be the purchaser or the tenant.
The FICA recognises this and accordingly recognises the purchaser or the tenant as being the client.
Very simply put, the Act requires that estate agents must identify their clients and place of residence before entering into either a single transaction or a business relationship.
“We as the proverbial 'ham in the sandwich' have opted for the safe option and 'FICA' the buyer and seller, landlord and tenant.”
He says the next problem encountered is the timing of the FICA process, a prospective purchaser or tenant walks into a real estate office looking to buy or rent a property.
Strictly speaking, that potential purchaser or tenant would have to be FICA’d before an agent could even start talking to him or her about their requirements.
Similarly, if a potential seller or landlord wishes to sell or lease his/her property, that seller would have to be FICA’d before an agent could start talking business.
Compound the problem by assuming the purchaser/tenant, seller/landlord are using the services of a number of estate agents, that’s a lot of photocopying of IDs and utility bills to prove residence.
In practice most estate agents will only fully FICA a client, should a successful transaction take place.
The FIC are fully aware of the situation and should an amendment be forthcoming any time soon, we may see some changes, he says.
Getting FICA information for a single client should be relatively simple and more often than not it is.
Where the property is sold or purchased with multiple sellers or buyers, for example companies, cc’s or trusts, it becomes more difficult and requests for FICA information often fall on deaf ears.
According to the FIC, refusal to give the required information is to be treated as a suspicious transaction and reported to FICA, as well as any cash deposit of R25 000 or more.
The FIC are serious about their role and penalties for failure to comply range from R1 000 000 to R10 000 000 fine and up to 10 years in jail, he says.
Just Property Group and all its franchises adhere to these regulations and will assist landlords and tenants alike with the correct procedure, he adds.
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