The Financial Intelligence Centre Act, 38 of 2001, established the Financial Intelligence Centre as the national centre for the gathering and analysis of financial data. The FIC is mandated to identify funds generated from criminal acts and to combat money laundering and terrorist financing. The FIC Act imposes certain obligations on sectors deemed vulnerable to money laundering and terrorist financing by compelling those sectors to report the FIC.
The gathering of information and reporting of developments is reliant on the compliance of institutions and the submission of reports to the FIC from the identified sectors. As the FIC is the only entity authorised to gather and analyse transactions and financial data it is placed at a pivotal point to assist the tax authorities, law enforcement, investigating agencies and other competent authorities with necessary information to identify criminals and bring them to justice.
The FIC discharges this important mandate by developing and providing financial intelligence to a range of agencies, supporting the investigation and prosecution of criminal activity and identifying the proceeds of crime and combating money laundering and the financing of terrorism.
The Risk Management and Compliance Programme (“RMCP”) establishes guidelines and procedure to ensure full compliance with the FIC Act in identifying, measuring, monitoring, managing and reporting the material risks to which the enterprise may be exposed.
Section 42 of the FIC Act obliges estate agency enterprises to develop, document, maintain and implement a RMCP. Doing so ensures that management implements appropriate legal compliance programmes and adheres to areas of accountability thereby preventing money laundering and terrorist financing and efficiently allocating resources to meet the FIC requirements. The RMCP, accordingly, addresses and counters the money laundering and terrorist financing risks that may be faced by the enterprise.
The RMCP comprises policies, procedures, systems and controls to be implemented by, and within, estate agencies for this purpose.
Estate agents are accountable institutions in terms of the FIC Act and, as such, are required fully to comply with the FIC Act. The property sector has historically been used both to hide illegally obtained funds and as a vehicle through which criminals are able to introduce their illegally gotten proceeds into the financial system. Estate agency enterprises, consequently, should strive to create, promote and build a culture of compliance with the FIC Act and the Money Laundering and Terrorist Financing Control Regulations.
- SENIOR MANAGEMENT RESPONSIBILTITY AND ACCOUNTABILITY
The Board of directors, senior management or persons having the highest level of authority within an enterprise have the ultimate responsibility of ensuring that the enterprise maintains an effective internal anti-money laundering and counter-terrorist financing structure through the application of an appropriate RMCP. Such persons must not only ensure compliance by estate agency enterprises and their management and staff with the provisions of the FIC Act and the enterprise RMCP but also establish a corporate culture of compliance with the FIC Act and the Money Laundering and Terrorist Financing Control Regulations. Such persons are also obliged to ensure that these compliance functions are assigned to a person or persons having sufficient competence and seniority within the enterprise to ensure the effectiveness of its compliance functions.
The FIC Act requires estate agency enterprises to apply a risk-based approach when performing mandatory client due diligence measures. Risk refers to the likelihood and impact of uncertain events on set objectives and derives mainly from threat, vulnerability and consequence. While threat may potentially cause harm in the context of money laundering and terrorist financing vulnerability comprises those things that can be exploited by the threat or which may support or facilitate that threat and consequence reflect the impact of the threat or the exploitation of vulnerability should the impact actually materialise.
- RISK–BASED APPROACH
The FIC Act incorporates a risk-based approach to compliance requirements such as client due diligence, record keeping, reporting, and so forth. Estate agency enterprises must not only fully understand but also appreciate their potential exposure to money laundering and terrorist financing risks in the sector within which they operate.
The risk-based approach requires estate agency enterprises to identify and assess the risk of doing business with their customers with a view to deciding how best to manage that risk. Estate agency enterprises have now been accorded a greater discretion in determining the appropriate compliance steps for themselves. They must nevertheless ensure that adequate processes, proportionate to the size and complexity of the enterprise, are in place to identify and assess money laundering and terrorist financing risks. Estate agency enterprises are required to have a thorough understating of the risks associated with their business and to indicate how they plan to manage these identified risks across their client base.
The risk-based approach, in general terms, covers the following phases:
Phase I – risk identification
Identifying money laundering risks requires estate agency enterprises to implement appropriate measures to mitigate the identified risks. Where the risk of possible money laundering abuse is assessed to be higher they must ensure that implemented systems and controls provide for the obtaining of necessary additional information about clients, applying secure confirmation of clients information and conducting closer scrutiny regarding client transaction activities. Where there is a lower risk a simplified due diligence process, allowing for the obtaining of less information or a lesser frequency of scrutiny, may be conducted.
Phase II – risk assessment
When undertaking a risk assessment different categories will be assigned to the different levels of money laundering risk according to the risk scale that is used. The risk scale must be tailored to the size, complexity and circumstances of the individual estate agency enterprise. The complexity of the risk scale will, thus, reflect the size and complexity of the enterprise as well as its nature and the range of products and services that it offers. The assessment of money laundering risk should take account of all factors deemed to be relevant to an engagement with particular clients
Phase III – risk management
In developing a risk management framework estate agency enterprises must be mindful of: events, products and services that may result in an increased money laundering and terrorist financing risk; the internal control activities necessary to mitigate money laundering and terrorist financing risk; and residual risks to indicate levels of comfort as to whether or not the enterprise is sufficiently managing the probability and impact of the risk occurring. Estate agency enterprises are responsible for ensuring that money laundering risks are effectively managed. The controls that are implemented should be sufficient to detect any money laundering or terrorist financing risks and respond appropriately thereto.
Phase IV – risk mitigation
Risk mitigation, in the context of money laundering, refers to the activities and methods used by estate agency enterprises to control and minimise the identified money laundering and terrorist financing risks.
Phase V – risk monitoring
Risk monitoring requires estate agency enterprises continually to monitor the effectiveness of the control mechanisms and to engage in an ongoing review of the risk assessment to ensure the FIC requirements are complied with.
- INTERNAL CONTROL
The role of internal control is to manage identified risks and ensure that enterprise opportunities are maximised and that potential losses associated with unwanted events are reduced. Estate agency enterprises are required to devise control frameworks as a standard against which the effectiveness of internal systems of control can be assessed.
- SCOPE AND APPLICATION
Estate agency enterprises must appoint a person, or persons, having sufficient competence to assist that enterprise in complying with the provisions of the FIC Act and the enterprise RMCP. The Board of directors, senior management or persons having the highest level of authority within the enterprise are responsible for ensuring that the enterprise maintains an effective internal anti-money laundering structure through the application of an appropriate RMCP. The RMCP should provide a detailed description of how the compliance obligation is to be undertaken within the enterprise.
The RMCP endeavours, amongst others, to ensure that the enterprise has processes and internal controls in place to meet the compliance requirement of the FIC Act and make specific reference to:
- Client identification and verification
- Record keeping
- Person responsible for compliance
- Training of employees
- Registration with the FIC.
The RMCP, policies, procedures and processes of the estate agency enterprise must be:
- Designed to limit and control the risk of money laundering and terrorist financing;
- Fully consistent with the law; and
- Fully adhered to by all enterprise management and staff.
The RMCP describes the accountability of the board of directors or senior management and provides for the appointment of a person, or persons, with adequate seniority and experience within the enterprise to ensure its compliance with the FIC Act.
The RMCP indicates how the function of managing the establishment and maintenance of effective anti-money laundering and counter-terrorist financing systems and controls will be discharged within the estate agency enterprise.
The RMCP must clearly indicate how the estate agency enterprise intends providing ongoing training to its employees to enable them to comply with the provision of the FIC Act.
The RMCP must be commensurate with size, complexity and nature of the estate agency enterprise.
The nature and extent of the internal systems and controls of an estate agency enterprise, which form an integral part of the RMCP, is dependent on such factors as the:
- Nature, scale and complexity of the business of the enterprise;
- Diversity of its estate agency operations, including geographical diversity;
- Client, product and/or service profile of the enterprise;
- Distribution channels used by the enterprise;
- Volume and size of estate agency transactions conducted by the enterprise; and
- Degree of risk associated with each area of the estate agency operations of the enterprise.