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FICA FAQ   Article Date :30 Aug 2006 Estate agencies' obligations under the Financial Intelligence Centre Act (FICA) have been in the headlines recently. To judge from media statements by the FIC, although FICA has been in force for the past three years, not all estate agencies are complying with it. Well, they don’t have a choice - unless, of course, they're willing to risk being sent to prison, or being bankrupted by a multi-million rands fine. We, as the estate agency industry's professional home and training provider, include FICA in our courses, and we hold workshops and seminars from time to time (there's one next week, in fact). Many questions have arisen during our courses over the past three years. Here are the most frequently asked. What's the purpose of FICA? To fight financial crime, such as money laundering, tax evasion, and financing terrorist activities. It's based on gathering information, which the FIC (a branch of the National Treasury) can use to track down criminals and prosecute them. Why must my firm comply with FICA? Because it's the law. The FICA applies to eighteen categories of "accountable institutions", including estate agencies, attorneys, and banks. If your firm trades as an estate agency, then it must comply. What must my firm do to comply? Essentially, there are five requirements: verify the identity of every client before you do business with him/her/them; keep the verification, e.g. copy of the client's ID and phone bill, on file for five years; report any property sale or lease which you know, or have good reason to suspect, is "suspicious or unusual", i.e. is being used to launder money, or to evade payment of tax (or transfer duty or stamp duty), or to finance terrorist activity; establish written procedures for meeting these obligations, i.e. produce a manual; and designate someone in your firm as compliance officer, to make sure that everyone is trained in the procedures, and follows them. How do we verify a client's identity? As far as an estate agency is concerned, the client is the person who gives the firm the mandate, i.e. in most cases it will be the seller or the landlord. In the case of a sectional title management contract, the client will be the body corporate as a whole, not its individual members. Ask the client for a photocopy of his/her ID book (or passport if he/she's not a citizen), and some proof of his/her address, e.g. a copy of a recent municipal or telephone account. If the property has joint owners, e.g. a couple married in community of property, you must verify the identity of each of them. If the client is a company or a CC, then you need copies of its registration documents, plus proof of identity and address of each of its directors, and of the person who's representing it in the transaction. If the client is a trust, you need copies of its registration documents, plus proof of identity and address for its trustees, its beneficiaries, and its founder. You must keep the verification for five years after the transaction has been concluded, or the relationship has ended. When must we verify the client's identity? Before you conclude a transaction, or before you enter into a business relationship. We think it's most practical to verify the client's identity at the very outset, i.e. when taking the mandate. How and when must we report a "suspicious or unusual" transaction? This is tricky. If you know for a fact, or have very good reason to suspect, that your client, or another party to the transaction, is using it to launder money, or to evade paying tax or transfer duty or stamp duty, or to finance terrorist activity, or to carry out terrorist-related activity from the premises, then you must report what you know or suspect to the FIC. The FIC prefers online reports, and there's a report form on its website (www.fic.gov.za) for you to use. You should keep your report confidential. Do they really expect us to write a manual? The Act requires every estate agency, as an "accountable institution", to have a set of written compliance procedures, and you're free to devise your own, based on the contents of the Act. However, the Estate Agency Affairs Board has published a model manual, called Best Practice Guidelines, which you can buy from them and use. Who must be the compliance officer? Anyone in your firm. Essentially, the compliance officer must make sure that your firm has written procedures; that everyone is trained in them; that everyone follows them; and that verification records are kept for the required period. Where can I get more information? The FIC has a website (www.fic.gov.za), where you'll find a copy of the Act, and the Money Laundering Control Regulations (2002), and the amendment to them (2005). Be warned though: they're not the easiest pieces of legislation to read and digest. If you want to study them, you'll need to read the Act first, then use the regulations to interpret them, and then read the list of exemptions to see which sections don’t apply after all. In our view, the EAAB's Best Practice Guidelines are far easier to digest, and they focus on the requirements for estate agencies. To obtain a copy, phone the EAAB (011 731 5600) or e-mail them at eab@eaab.org.za. And, of course, you can attend our next workshop or course: phone our Training Department at 021 531 3180. CLICK HERE TO RETURN TO THE MAIN NEWS PAGE