FICA - Heavier compliance on horizon for professional accountants

04 April 2018 | Web Article Number: ME20189246

Commerce & Trade

THE proposed inclusion of professional accountants into a schedule of the Financial Intelligence Centre Act (FICA), making them accountable institutions, will have major repercussions for the accountancy industry.

That’s according to Faith Ngwenya, Technical Executive at the South African Institute of Professional Accountants (SAIPA), who said that the Financial Intelligence Centre (FIC) had identified the sector as being “vulnerable” to money laundering and terror financing activities.

Institutions identified in Schedule 1 to the FICA include lawyers, estate agents and banks and in Schedule 3 include motor vehicle dealers and dealers in Kruger rands.

FICA - Heavier compliance on horizon for professional accountants

The act requires that accountable institutions register with the FIC, that they disclose the identity of their clients to the centre, train their employees, appoint a compliance officer, draw up a risk register and plans to mitigate the risks, give them additional recordkeeping duties, and oblige them to report to the FIC.

She said SAIPA had raised concerns in terms of the compliance burden that would now go way beyond the existing obligation to report suspicious transactions or activities. “The latest proposals will impact on the administrative and financial burden of especially small practices and people running their own businesses.”

She decried the “overly broad” wording of the proposal. “It also appears to be in conflict with existing legislation such as the Companies Act.” In terms of the act a person can register his or her own company by simply registering with the Companies and Intellectual Properties Commission.

She stressed that SAIPA was not shunning its responsibility as a regulatory body, but was requesting much more clarity on some of the wording, to understand the impact of the proposals.

“Questions which beg answers are whether there will be monetary thresholds or number of employees which may exclude some of the smaller firms from this heavy compliance burden, whether there will be financial or administrative assistance if smaller firms are not excluded, and what exactly defines ‘assisting’ a client.”

Who will be an accountable institution?

Ngwenya said that according to the FIC any person who carries on a business of preparing for or carrying out transactions for a client concerning the following activities will be considered an accountable institution:

  • Assisting a client in the planning or execution of the buying or selling of immovable property; the buying or selling of a business; the opening or management of a bank, investment or securities account; the organisation of contributions necessary for the creation, operation or management of a company outside South African; the organisation of contributions necessary for the operation or management of a close corporation; the creation, operation or management of a company or a close corporation; and the creation, operation or management of a trust outside the country.
  • Representing a client in any financial transaction;
  • Assisting a client in disposing of, transferring, receiving, retaining, maintaining control of or in any way managing any property; or
  • Assisting a client in the management of any investment.
Money launderers and accountants 

According to the FIC professional accountants are “particularly useful” for money launderers when it comes to the seeking of financial and tax advice to reduce their tax liabilities or to place vast amounts of proceeds.

They approach professional accountants to help with the setting up of companies and trusts to hide the proceeds of crime and the perpetrator of crime. They also use property transfers as a cover to move illegal funds and they use accountants to get access to financial institutions.

“SAIPA believes there are solutions to deal with concerns raised by the FIC, but that the current proposal is a kneejerk reaction to the behaviour of unscrupulous practitioners.

“However, if the proposal is accepted as it is accountants who are awarded the professional accountant designation by the institute must be aware that they will be considered an accountable institution. They will have to comply with the requirements set out in the FICA schedule.”

If this was to happen, Ngwenya said, professional accountants would find themselves forced to carry out the duties and responsibilities of a forensic investigator and an auditor, all in one.

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