Greylist exit at stake
WARNING: NOT MANY FIRMS COMPLIANT WITH FICA AMENDMENTS
Many credit providers seemingly in dark about obligations.
It is not only slack governance that is keeping South Africa on the greylist. South African credit providers are also jeopardising the country’s chance to get off the greylist due to their sluggish uptake of financial intelligence centre regulations which could also result in severe penalties.
South Africa was greylisted by the Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog that sets international standards.
It is compulsory for companies that provide credit to register as “accountable institutions”.
In this case, credit providers that include estate agents, casinos and crypto companies must gear up to become accountable institutions under last year’s amendments to the Financial Intelligence Centre Act.
The amendments took effect on 19 December, 2022 as part of efforts by National Treasury to amend five pieces of legislation.
Frank Knight, CEO of Debtsource, warns that based on levels of compliance and awareness of the requirement in the trade credit market, not many companies are doing so and this will be noted by the FATF – to South Africa’s detriment.
Beyond the immediate necessity for compliance, the stakes are high for accountable institutions.
The potential repercussions include not only financial penalties, but also reputational damage and a tarnished business environment.
As the international community watches, SA’s ability to shed the greylisting tag hinges on the conscientious adoption of Financial Intelligence Centre (FIC) regulations by its credit providers.
“There is a scale of administrative sanctions, starting with a caution that increases to a reprimand, then a directive to take remedial action, then a restriction or suspension of certain specified business activities and a financial penalty of up to R50 million.”
Knight said the FIC’s directive requires that all credit providers must register with the FIC.
“Despite concerted efforts by industry players, such as Debtsource, to advise clients, a significant portion of credit providers, including major international entities, seem to be in the dark about regulatory obligations.
“The looming deadline of 1 December adds pressure on credit providers to swiftly comply with the regulations to avoid severe penalties.”
The FATF’s directives aim to address vulnerabilities in the financial system by expanding reporting obligations. This is paramount in curbing the proliferation of illicit funds in the economy. –