Financial Intelligence Centre (FIC) Risk and Compliance Returns (RCRs) update on compliance

Financial Intelligence Centre (FIC) Risk and Compliance Returns (RCRs) update on compliance

• 30 July 2024
• Regulatory Compliance and Legislation
• South African Accounting Academy

Certain designated non-financial businesses and professions (DNFBPs) are continuing to ignore Financial Intelligence Centre (FIC) directives aimed at helping South Africa exit the grey list of the Financial Action Task Force (FATF).

The continued disregard of compliance with requirements of Directives 6 and 7, remains a major stumbling block to South Africa making any meaningful headway toward exiting the grey list. This is despite these business sectors being identified as being the most vulnerable to ML and TF abuse.

In October 2023, FIC urged non-compliant Accountable Institutions to submit their RCRs by 13 October 2023 – or face administrative sanctions.

FATF remains concerned about the low rates of RCR submission to the FIC by DNFBPs, and emphasised that these accountable institutions needed to increase their response rates.

The RCR is a questionnaire which assists business in identifying the risks they face of ML and TF abuse. Once received, the FIC uses its Risk and Compliance Assessment Analysis tool to evaluate the RCRs, identifying higher risk DNFBPs. This informs the FIC’s supervisory approach, which includes inspections on high-risk entities.

In March 2023, the FIC issued Directive 6 calling upon legal practitioners, estate agents, trust service providers, company service providers and casinos to complete and submit their RCRs online, via the FIC website. The due date for these RCRs submissions was 31 May 2023, which is over a year ago.

The average RCR submission rate to date of this release across affected Directive 6 sectors is 63 percent, and individual sector submission rates are:

• Legal practitioners – 60 percent
• Estate agents – 66 percent
• Trust service providers – 74 percent
• Company service providers – 76 percent
• Casinos – 100 percent

The FIC once more notifies these sectors, other than the casinos, that by not submitting their RCRs they are in a state of non-compliance. They are therefore positioning themselves to having administrative sanctions being imposed on their businesses.

The current low response levels mean that the country is unable to show sufficient progress in fully addressing the FATF-identified deficiency that DNFBPs are unable to identify their risks ML and TF abuse risks. With these levels of non-compliance, the FIC has already embarked upon issuing of notices of intention to sanction, sanctions and fines.

The FIC has already embarked upon issuing notices of intention to sanction, aimed at remediation and payment of fines as admission of non-compliance. Institutions that elect not to comply and pay the financial penalty, are processed through a formal adjudication process. In such instances the resulting financial penalty may be increased due to the willful non-compliance by such these institutions. The platform for the completion and submission of outstanding RCRs remains active and accessible on the FIC website www.fic.gov.za.

Click here to download the Media Release:

https://www.fic.gov.za/wp-content/uploads/2024/07/Media-Release-RCR-update-23-July-2024.pdf

Relevance to Auditors, Independent Reviewers & Accountants:

• The Financial Intelligence Centre Act (FICA) is yet another piece of legislation that your clients must comply with, and which you must assess compliance with.  If they don’t comply with the relevant laws and regulations, you have certain reporting obligations in terms of NOCLAR (NOn-Compliance with Laws And Regulations) – this could include reporting to management, qualifying your audit opinion, reporting a Reportable Irregularity, etc.
• As an auditor and independent reviewer, you need to consider amendments, regulations and directives that are gazetted relating to FIC and accountable institutions, to ensure that your clients (or even your own practice) comply with their reporting obligations.
• As a TCSP that is regarded as an AI, you need to submit your RCR, or face administrative sanctions.

Relevance to Your Clients:

• Relevant entities (specifically accountable institutions) have a duty to comply with the FIC Act, otherwise they could be held liable.
• Relevant entities should be aware of amendments, regulations and directives that are gazetted relating to FIC and accountable institutions, to ensure that they comply with their reporting obligations.
• All accountable institutions need to submit their RCR, or face administrative sanctions.

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