5 July 2023 - 3 minute read
The Financial Intelligence Centre (FIC) has recently issued Directive 7 aimed at strengthening anti-money laundering and counter-terrorism financing measures in the trade of high value goods. This directive, effective from the date of publication (31 March 2023) in the Government Gazette, introduces new requirements for High-Value Goods Dealers (HVGD) to mitigate the risks associated with cash transactions and ensure compliance with the Financial Intelligence Centre Act. In this article, we will delve into the key points of the directive, with a particular focus on the section concerning HVGD as an Accountable Institution.
An HVGD includes “a person who carries on the business of dealing in high-value goods in respect of any transaction where such a business receives payment in any form to the value of R100 000 or more, whether the payment is made in a single operation or in more than one operation that appears to be linked, where “high-value goods” means any item that is valued in that business at R100 000 or more.
An HVGD’s reporting obligations relating to cash threshold reports (CTR) in terms of section 28 of the FIC Act arises in a transaction or business relationship relating to a high-value good with a client.
Should an HVGD enter into a transaction in relation to a high-value good, and the client pays a portion of the R100 000 or more in cash, which meets the CTR reporting threshold of R49 999.99 and above, the cash element remains reportable to the Financial Intelligence Centre as a CTR.
The directive acknowledges that HVGD includes entities dealing in precious metals, stones, and luxury goods. However, it is important to note that this is not an exhaustive list. For instance, Farmers engaged in the trade of high value goods, such as high-value or exotic wildlife, pure-bred livestock (especially through auctions), and expensive farming equipment is also considered as HVGD. These farmers face similar risks associated with cash transactions and must adhere to the thresholds outlined in the directive.
The directive emphasises the risks associated with cash transactions and requires HVGD to adhere to specific thresholds as stated above. The mention of large denomination cash payments and payments from high-risk jurisdictions highlights the need for heightened vigilance. HVGD must closely monitor transactions involving new customers with minimal history in dealing with high value goods, as well as those conducted far away from residential or business areas without a rational reason.
To ensure compliance with the directive, HVGD must register with the Financial Intelligence Centre (FIC), and ensure to implement a robust Risk Management Compliance Programme (RMCP). Additionally, HVGD will need to complete a risk and compliance return questionnaire, an automated return that must be submitted electronically to the FIC before 17:00 on 31 July 2023. It is crucial for HVGD to familiarise themselves with these requirements and deadlines and ensure timely compliance. The reporting period for this risk and compliance return is from 1 January 2023 to 30 June 2023, both dates inclusive.
Non-compliance with the directive, including failure to submit the risk and compliance return, may result in administrative sanctions in accordance with the FIC Act. HVGD should understand the potential consequences of non-compliance and take the necessary steps to fulfil their obligations.
The FIC's directive for High Value Goods Dealers serves to enhance the regulatory framework and mitigate risks associated with cash transactions. While the directive provides examples of HVGD, it is important to recognise that the list is not exhaustive. Farmers engaged in high-value goods transactions should also adhere to the requirements. By following the specified thresholds, meeting registration deadlines, and completing the risk and compliance return, HVGD can ensure compliance and contribute to a more secure and transparent trade environment.
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