Know your status!
The Financial Intelligence Centre Act of 2001 (FICA) focuses on identifying the proceeds of crime and combating money laundering, as well as terrorist and proliferation financing. To ensure that FICA adapts to the changing money laundering landscape, it regularly undergoes amendments that contribute to improving South Africa’s legislative framework for anti-money laundering and countering the financing of terrorism and proliferation financing. One of the amendments affecting the jewellery sector took effect in December 2022.
As a business in the jewellery sector, it is of critical importance to know your status and if you are deemed to be a “High -Value Goods Dealer” (HVGD). Any business, irrespective of industry or sector, that meets the criteria to be classified as a HVGD are accountable institutions and bear the corresponding obligations under FICA.
HVGDs criteria
HVGDs are persons (natural or juristic) who, in the ordinary course of their business, trade in goods (not services) valued at R100 000 or more per item, irrespective of whether the transaction is concluded through a single payment or multiple linked payments. Therefore, if you are a business that sells jewellery items or manufacturing machinery and those items are sold for more than R100 000 per item, you are an HVGD and must comply with FICA.
It is important to note that if your business or you meet the criteria above, you are required to comply with FICA irrespective of the set-up (i.e. company, sole proprietor, etc.) or size of your business or operations. There is also no minimum threshold of annual turnover or positioning in the industry that determines whether you are required to comply with FICA.
Compliance obligations under FICA
Accountable institutions such as HVGDs face a range of important responsibilities under FICA that are crucial for maintaining transparency and integrity in financial dealings. These key obligations help safeguard our financial systems and require accountable institutions to:
- Register with the Financial Intelligence Centre (FIC) as soon as possible.
- Develop and implement a Risk Management and Compliance Programme (RMCP). A RMCP deals with an institution’s processes and procedures to comply with its FICA obligations by following a risk-based approach.
- Implement customer identification and verification processes, and conduct customer due diligence.
- Appoint a FICA Compliance Officer and in some cases, Money Laundering Reporting Officers (MLRO).
- Regularly train employees on FICA and your RMCP, and screen employees for integrity and competency.
- Complete regulatory submissions to the FIC, such as the compulsory risk and compliance returns (RCRs) and more recent RMCP submissions.
A deeper dive into Risk Management and Compliance Programmes
An RMCP is a documented framework that accountable institutions must implement to identify, assess, monitor and mitigate financial crime risks, more specifically those related to money laundering, terrorist and proliferation financing.
The content of the RMCP is prescribed in FICA but requires personalisation to ensure that it speaks to the business’s operations. It is the cornerstone of an accountable institution’s FIC strategy and must be based on a risk-based approach.
The risk-based approach requires accountable institutions to evaluate and adequately manage the money laundering and terrorist and proliferation financing risks associated with their clients, transactions, product and services, delivery channels and geographic locations. As a result, there is no “one-size-fits-all” document that will result in full FICA compliance over multiple accountable institutions.
The RMCP must outline clear governance structures, with management oversight and a designated, internal FICA Compliance Officer responsible for ensuring adherence to FICA obligations. Customer due diligence (CDD), reporting procedures as well as record-keeping obligations are also outlined in the RMCP.
It is not enough that a RMCP be in place. The FIC is critically analysing whether its content is true to the daily operations of the accountable institution and that the RMCP is actively applied by the relevant employees of the accountable institution.
Consequences of non-compliance
Since the FICA amendments became effective, we have seen increased enforcement of the RMCP requirement. The FIC as well as the other supervisory bodies have been inspecting accountable institutions and critically analysing their RMCPs to ensure that they are compliant with FICA.
Accountable institutions whose RMCPs have been found to be non-compliant have been sanctioned with a significant financial penalty and, as these sanctions are often published, an accountable institution may also face the reputational damage.
Please be aware that the FIC is currently conducting inspections at various businesses within the jewellery sector, making findings and issuing administrative sanctions. Ignorance is no excuse and the penalties for non-compliance are severe.
Kindly take note that the FIC will be requiring that all HVGDs submit a further RCRs as from 31 May for the periods 2023-2025. For more information as to what the return will entail, please consult the FIC website at: draft Risk and Compliance Return – High-value goods dealers
Questions to ask yourself
Here are some questions you can ask yourself about your RMCP to determine whether you can be confident in your compliance with the requirement:
- Do I have an RMCP?
- If so, when last did I review and update my RMCP and have the recent legislative amendments been included?
- Have I conducted a business risk assessment for FICA purposes?
- Does my RMCP speak to the risks identified in my business? In other words, is the RMCP customised to the risks I have identified in my business?
- Has my RMCP been approved by the Board of Directors or senior management of my business?
- Can I demonstrate that my employees apply my RMCP in each and every transaction?
If you have responded “No” to any of the questions above, you will benefit from the services that Moonstone Compliance offers. Our FICA services are designed to be adaptable to your specific requirements and we offer a range of solutions, from the provision of essential documentation to the development and implementation of a comprehensive FICA and AML framework.
Moonstone Compliance was established in 2002 and, with over twenty years of experience, has solidified its position as a trusted leader in the industry. The company is well regarded for its ability to deliver professional compliance solutions to its clients.