Pursuant to its mandate to identify the proceeds of crime to combat money laundering and the financing of terrorist activities, the Financial Intelligence Centre (‘the FIC’) recently revised its risk assessment reports for legal practitioners and estate agents. These reports provide sector-specific information on money laundering and terrorist financing risks to guide agents and attorneys in the course of business.
Looking specifically at the real estate sector, the FIC’s Assessment of the Inherent Money Laundering and Terrorist Financing Risks: Estate Agents has been updated to reflect the latest statistics relevant to the sector and to accommodate new regulatory knowledge and feedback from the FIC’s risk assessment survey conducted in 2019, among other things.
The FIC reports that 36 653 cash threshold reports (‘CTRs’) were filed by estate agents between April 2018 and March 2023, which equates to an average of 7 331 CTRs per annum. During the 2022/23 financial year, the filing of CTRs declined significantly, which is consistent with the increase in the cash receipt reporting threshold from R24 999.00 to R49 999.00 in November 2022. During the same five-year period, estate agents submitted 926 suspicious and unusual transaction reports to the FIC with 252 of those reports filed in the last financial year alone.
Of particular significance is the expansion of the list of factors estate agents should rely on to measure risk in transactions involving the sale or lease of property. Compiled from information published by the Financial Action Task Force – an intergovernmental, standard-setting body – and an examination of sector-specific regulatory reports, the FIC’s revised guideline provides 13 useful factors to identify and assess risk. In addition to factors such as clients’ reluctance or refusal to furnish an estate agent with their personal identity documentation or the acceptance of third-party payments from foreign jurisdictions with weak, anti-money laundering systems, the FIC identifies a client’s hesitance to permit an agent access to the property that they are renting as a risk factor.
Emphasising the link between financial crimes and high-value properties, the report notes that the geographic position of estate agencies – and the properties that they market – are crucial signifiers of risk. Specifically, the FIC notes that agents involved in the marketing and sale of high-end properties in the Western Cape towns of Franschhoek and Stellenbosch, and those located along Cape Town’s Atlantic Seaboard and Constantia, for example, must adopt additional measures to manage and minimise the inherent money laundering and terrorist financing risks associated therewith.
It is advised that estate agents read this report and familiarise themselves with its contents to assist them with complying with their statutory obligations under the Financial Intelligence Centre Act.
Please contact us at compliance@stbb.co.za should you require assistance with adapting your current risk assessment protocol to align with the revised report.
