On 2 October 2017, a legislation came into effect by way of the new Financial Intelligence Centre (FIC) Amendment Act which made further amendments to the FIC Act, 2001.
The Act will significantly impact the property market and industry specifically with regards to residential and commercial property at the higher end of the property market.
The purpose of the newly amended FIC Act is to further cut down on any financial crimes that may occur across borders (money laundering, terrorist funding etc.). The result will be much more clarity and honesty present in the financial system of the country.
Financial institutions are now required to be aware of where their customers get their money from.
It will affect accountable institutions such as estate agents, banks, foreign exchange service providers, trusts, attorneys and others who have a lot more requirements to meet from now on.
This Act will also have an an effect on all clients wishing to enter into a property transactions or other ongoing business relationships
In hopes of extinguishing corruption within the country there has been an improvement with regards managing the relations and ensuring the legal compliance of influential and prominent individuals who do business in through the country. The act refers to 'foreign prominent public officials' and 'domestic prominent influential persons'.
As a result of this, the property market and even the prices of property could be affected.
Thus individuals who intend on purchasing a property as well as estate agents need to take heed. This could have a significant effect on the property market, and possibly the prices of property as well.
Examples where such an influential person could face issues is when they purchase a property with cash. The transaction could be placed under investigation to check for compliance.
If the source of these funds can’t be determined or if they are found to be connected to criminal activity, then the funds could end up being frozen.
If this is the case, then the buyer of the property will not be able to fulfill the contract thus breaching the terms of it, which will result in the deposit being forfeited as well as legal action being taken.
Directors of accountable institutions such as Estate Agents may be liable for damages where they have not acted in compliance with the new amendments of the FIC Act.
To protect purchasers and sellers of property, it is crucial for effective Risk Management and Compliance Programmes to be developed by the real estate industry.
While a large amount of resources will need to be used for getting to know clients who avail of their services, it is a requirement which will save a lot of stress and prevent serious complications, which could affect the industry in the process.
The need for the relevant institutions to thoroughly assess their customers as to whether they will be of high risk is highlighted in the amended 'Know Your Customer' requirement.
Throughout the transaction process, the institution will have to monitor all aspects of the transaction to ensure compliance.
If the industry truly is serious about extinguishing corruption throughout South Africa, they can show this by applying the risk management system to monitor their clients and by embracing all aspects of the amended FIC Act.
Contact us to check if you are compliant.
Subscribe to our Newsletter
Estate Agent Training
Bond & Transfer Calculator
Get the latest updates in your email box automatically.