Christopher Malan | Head | Compliance and Prevention | Financial Intelligence Centre (FIC) | mail me |
Designated Non-Financial Businesses and Professions (DNFBPs) registered with the Financial Intelligence Centre (FIC) have shown positive efforts. Importantly, their commitment has significantly contributed to progress. And as a result, South Africa is now closer to exiting the Financial Action Task Force (FATF) grey list.
Despite these strides, the FIC reminds DNFBPs under its supervision of ongoing grey listing concerns. Specifically, South Africa has only partially addressed issues related to DNFBP risk and compliance understanding. Importantly, these concerns were raised by the Financial Action Task Force (FATF) and still require attention.
Strengthening oversight through DNFBP reporting
DNFBPs include legal practitioners, estate agents, trust service providers (including accountants), and dealers in precious stones and metals (including Krugerrands), and other dealers in high-value goods.
Areas of concern remain DNFBP’s level of understanding of their own risk and compliance situation and their reporting to the FIC, as their sole DNFBP supervisory body for anti-money laundering, combating of terrorist financing and countering the financing of proliferation of weapons of mass destruction.
South Africa is required to “improve risk-based supervision of DNFBPs by a) Implementing and keeping up-to-date supervisory risk-assessment tools to identify higher risk DNFBPs as a basis for risk-based supervision….”
However, South Africa has not yet met this requirement fully. This is due largely to the fact that the number of risk and compliance returns (RCRs) submitted by DNFBPs to the FIC, especially by legal practitioner and estate agent businesses, remains unsatisfactory.
DNFBP compliance reporting requires sector-wide action
In accordance with South Africa’s understanding of its money laundering and terrorist financing risks, these two sectors are considered to be higher-risk DNFBP sectors.
On average, these two sectors’ current RCR submission rate is at around 70 percent. Legal practitioners and estate agents have submitted 11,351 and 6,506 RCRs, respectively.
While the priority risk-based focus is on estate agents and legal practitioners, the other DNFBP sectors such as high value goods dealers, including dealers in precious stones, and dealers in precious metals (which includes Krugerrand dealers), as well as trust service providers (including accountants), must also substantially and urgently file their outstanding RCRs with the FIC forthwith.
Critically, RCR submission rates across all DNFBPs must move closer to the 100 percent mark over the current quarter (April to June 2025) for the FIC to improve its risk-classification for each sector.
Should we attain a closer to 100 percent RCR submission rate across all DNFBPs, the better would be our risk assessment and analysis of RCRs per sector to identify more credible numbers of higher risk ratings for businesses and professions, and in aggregate across all DNFBP sectors. This will improve the risk-based selection of higher risk DNFBP entities for supervisory inspections.
The key issue that requires urgent attention are that individual DNFBP accountable institutions who have long outstanding RCRs must submit their RCRs to the FIC without further delay.
RCRs provide an accurate view of sectors’ understanding of their money laundering and terrorist financing risk. By analysing the submitted returns, the FIC can identify, to a granular level, individual businesses that are at risk. This then informs its risk-based supervision, guidance and awareness content. The starting point unquestionably is the timeous completion and submission of RCRs.
FIC’s role in DNFBP supervision
Our Directives 6 and 7 issued in 2023, called upon identified businesses and professions to submit their RCRs. This platform remains open on our website and the urgency for completion of RCRs remains.
For South Africa to demonstrate continued and sustained focus on ensuring the robustness of our economy, business needs to play its part. All DNFBPs across various sectors, subject to FIC supervision, now need to demonstrate consistent compliance behaviour and urgency in submission of all outstanding RCRs.
While most of the DNFBP sectors listed in the FIC Act have rallied to the compliance challenge of remediating the action items through the submission of the RCR to the FIC, much higher levels of compliance are needed. With little to no information on the risks these sectors face, as the regulator, the FIC can only assume that those who are non-compliant are at high-risk of money laundering and terrorist financing abuse.
We are appreciative of the industries and sectors that have submitted their RCRs but, non-compliance by their peers is negatively impacting on these positive steps. All non-financial businesses and professions that have not yet done so are urged to urgently complete and file their RCRs with the FIC.
