According to an International Monetary Fund assessment, “the widespread use of cash in South Africa poses a high risk for money laundering and terrorist financing”. With that in mind, the Financial Action Task Force (FATF) issued a report in October 2021 requiring substantial legislative changes by November 2022 in order for South Africa to avoid being greylisted by the international watchdog.
The FATF report highlights estate agents as high risk due to their “poor understanding” of the risks and obligations when it comes to anti-money laundering and terrorist financing. As the country with the largest real estate sector in sub-Saharan Africa, amounting to $50.2 billion in 2019, South Africa is therefore at particular risk of wrongdoing.
What has changed?
In response, on 14 October 2022, the SA government revised the cash reporting threshold (Regulation 22B) in the Money Laundering and Terrorist Financing Control (MLTFC) Regulations. From 14 November 2022, estate agents are required to change their Cash Threshold Reporting.
As of that date, estate agents must report all cash transactions greater than R50 000 (previously R25 000) to the Financial Intelligence Centre (FIC).
In addition, estate agents now have three days (previously two) to report a cash transaction or series of cash transactions that exceed R50 000. Non-compliance with this law could be costly, with maximum penalties of imprisonment for up to 15 years or a fine of up to R100 million.
This isn’t the only requirement agents need to be aware of when processing payments. Section 29 of the FIC Act as outlined in these guidelines makes it clear that all suspicious and unusual transactions must be reported to the FIC, no matter how much money is involved.
Compliance key for agents
Jan Davel, CEO of PayProp South Africa, says “Estate agents are accountable institutions under the FIC Act and must therefore be registered with the Financial Intelligence Centre. At PayProp, we will only process rent on behalf of an agency if it is registered with both the Property Practitioners Regulatory Authority and the Financial Intelligence Centre”.
PayProp assists agencies to identify cash deposits that exceed the reporting threshold. The platform’s ‘posted payments’ report allows agents to filter incoming transactions by type, so agents can easily see all of the cash coming into the business before it is reconciled.
Davel concludes, “a quarter of South Africans live in rented accommodation, and as property professionals, we need to ensure that their rental payments are handled carefully.”