Are You a High-Value Goods Dealer? Understanding Your FIC Act Obligations

A change many businesses have not yet absorbed

On 19 December 2022, amendments to Schedule 1 of South Africa’s Financial Intelligence Centre Act (FIC Act) brought dealers in high-value goods within the scope of the Act as accountable institutions.

For many businesses, this was a significant change. Motor vehicle dealers, jewellers, art dealers, antique dealers and other businesses that had not previously regarded themselves as regulated may now have obligations similar to those of other accountable institutions.

Understanding whether those obligations apply is the first step.

When does a business qualify?

Under item 20 of Schedule 1, a high-value goods dealer is a business that deals in high-value goods and receives payment of R100,000 or more for a transaction.

The Financial Intelligence Centre’s guidance, Public Compliance Communication 58, clarifies several points:

• Payment in any form counts, including cash, electronic transfers, card payments and cheques.
• Payment may be received in a single operation or in several linked operations, such as a deposit followed by the balance.
• The threshold applies to the value of an individual item, not to the combined value of several items.
• Dealing in high-value goods must form part of the ordinary course of the business.

The guidance also cautions that splitting transactions, or setting prices to stay below the threshold, may itself be a contravention of the FIC Act.

Which goods are included?

High-value goods are items valued in the business at R100,000 or more. The guidance gives examples that include motor vehicles and vehicle parts, jewellery, precious metals and stones, fine art, antiques, luxury clothing and accessories, and livestock and game. New and used goods are both included.

The list is illustrative rather than exhaustive. The question is not the type of product but the value of the items a business deals in and how it is paid for them.

What obligations apply?

A qualifying business must register with the Financial Intelligence Centre as an accountable institution. The guidance indicates that registration is required once a business reasonably expects to deal in high-value goods, not only after its first qualifying sale.

Depending on the business and its activities, obligations may then include:

• Risk Management and Compliance Programme (RMCP): Developing, documenting, maintaining and implementing a programme that reflects the business’s actual risks.
• Customer due diligence: Identifying and verifying customers, understanding beneficial ownership where relevant, and applying enhanced measures to higher-risk relationships.
• Record keeping: Keeping customer and transaction records for the periods the Act requires.
• Reporting: Cash threshold reports for cash transactions of R50,000 or more, suspicious and unusual transaction reports regardless of value, and terrorist property reports where applicable.
• Governance and training: Clear responsibility for compliance at a senior level, and employees who understand what is expected of them.
• Regulatory returns and submissions: Responding to applicable FIC directives, such as risk and compliance returns and annual RMCP submissions.

Common misunderstandings

Several assumptions can leave a business exposed:

• “We have never registered, so the Act does not apply.” Whether a business is an accountable institution depends on its activities, not on whether it has registered.
• “Our customers pay by electronic transfer, so we are not affected.” The item 20 threshold applies to payments in any form. Cash threshold reporting is a separate obligation that applies to cash.
• “A standard template RMCP is enough.” A template may be a starting point, but the programme must reflect how the business actually operates.

Five questions to ask about your business

1. Do we sell individual items valued at R100,000 or more? Consider the full range of products, including used and trade-in goods.
2. How are we paid? Consider deposits, instalments and linked payments, as well as the payment methods customers use.
3. Are we registered with the Financial Intelligence Centre? If not, establish whether registration is required.
4. Does our RMCP reflect how we operate? It should describe our customers, products, payment arrangements and controls, not a generic business.
5. Do our people know what to do? Employees should understand when to verify a customer, how to recognise a reportable transaction and how to escalate concerns.

The bottom line

For many businesses dealing in high-value goods, the FIC Act is now part of everyday operations.

The starting point is establishing whether the business qualifies. From there, the objective is a proportionate set of arrangements that meets the applicable requirements and works in practice for the people who apply them.