Money laundering and the Financial Intelligence Centre Act

The sale of a property and the transfer of ownership along with the transfer of significant funds opens itself up to fraudulent activity which is why it is important to familiarise yourself with the risks surrounding money laundering and how the Financial Intelligence Centre Act aims to protect citizens.

The ins and outs of subject to bond approval clauses

What is money laundering?

Money laundering is the process of taking proceeds obtained through unlawful activities such as drug trafficking, insider trading or tax evasion and making them appear legal. In this way, the banks and other financial institutions are unlikely to become suspicious when dealing with these funds, preventing the funds from being confiscated by the authorities. 

While many property transfer scenarios will involve regulated banks and other financial institutions providing low risk, a property transfer remains susceptible to money laundering activities so it is important to be alert and be able to recognise suspicious transactions.

What is considered unlawful activity?

The Prevention of Organised Crime Act defines unlawful activity as “any conduct which constitutes a crime or which contravenes any law whether such conduct occurred before or after the commencement of this Act and whether such conduct occurred in the Republic or elsewhere.”

A person is guilty of money laundering if they assist another person to benefit from the proceeds of the unlawful activities.

The process of money laundering

There are three stages during the process of money laundering:

  • Placement: the proceeds of the unlawful activity are placed in the financial system
  • Layering: a series of transactions is made to obscure the true nature and origin of the proceeds
  • Integration: the proceeds are re-integrated into the financial system as what appears to be legitimate funds and returned to the control of the criminal

Applying this practically in the roles played by property and legal professionals in the property market, they could be involved in all three stages. They may receive the proceeds from a client (potentially resulting in placement), they invest or facilitate the property transaction on behalf of the client (which could facilitate layering) or refund the client if the transaction is cancelled (providing opportunity for re-integration).

What is the main purpose of FICA?

The Financial Intelligence Centre Act (FICA) was introduced to criminalise and combat money laundering and other organised crime. The Act creates the administrative framework for money laundering control. It designates certain statutory bodies and functionaries as “supervisory bodies” and requires them to report suspicious transactions. The Law Society of South Africa has been designated as the attorney’s supervisory board. Accordingly, all attorney firms must comply with the obligations imposed by FICA. The Estate Agency Affairs Board is also a supervisory body in terms of the Act and as such, must be registered with the Financial Intelligence Centre and must adhere to the various duties imposed by FICA. They are accountable institutions because their role is often manipulated by money launderers to disguise the proceeds of unlawful activity.

It is important to have created this responsibility on supervisory bodies in South Africa to protect the integrity and stability of its financial system, allow the country to develop economically and to enable it to be a responsible global citizen.

Follow Snymans on Facebook for more legal information, tips and news about property.

Recommended for you

Amendments to the Financial Intelligence Centre Act (FICA)
Legislative Guidelines

The FIC Act: How it’s tackling money laundering in South Africa[post_view before=""]

The Financial Intelligence Centre (FIC) defines money laundering as “the process used by criminals to hide, conceal or disguise the nature, source, location, disposition or movement of the proceeds of unlawful activities or any interest which anyone has in such proceeds.”

Read More
Minors and immovable property
Legislative Guidelines

Court ruling: The applicability of the Consumer Protection Act in rental agreements[post_view before=""]

In the recently decided case of Magic Vending (Pty) Ltd vs N Tambwe and two other occupants of a rental house in Wynberg, the Western Cape Division of the High Court was asked to rule on a) whether the Consumer Protection Act applied to the case in question and b) whether the enforcement of the forfeiture clause contained in clause 14 of the lease agreement was contrary to public policy.

Read More
Minors and immovable property
Legislative Guidelines

Non-resident sellers: Make sure you comply with SARS requirements[post_view before=""]

Non-resident property sellers should be aware of the requirements of section 35A of the Income Tax Act 58 of 1962. The section stipulates that an amount equal to 5% (individuals), 10% (companies) or 15% (trusts) of the proceeds of a sale of immovable property must be withheld and paid over to SARS within 14 days after “the date on which the amount was so withheld” – this is typically the date of registration of transfer. An exception is if the parties agree that the purchase price be paid before registration, in which case the 14 days will be calculated from such payment date.

Read More
Minors and immovable property
Legislative Guidelines

Comment on the Expropriation Bill, 2020[post_view before=""]

This article seeks to highlight some aspects of expropriation of land by looking at the current section 25 of the Constitution and the Expropriation Bill 2020, issued by the Department of Public Works and Infrastructure.

Read More
Property Blog Articles | Advice | Contractual Matters | Market News
Legislative Guidelines

Land claims and their impact on the registration of mortgage bonds[post_view before=""]

When it comes to commercial lending transactions, the lender – usually a commercial or corporate division of a bank – may require confirmation that there are no land claims in process in respect of the property or properties that will form part of the security to be registered in the lending structure.

Read More

Need more Snymans content?

Sign up for our monthly newsletter.

Money laundering and the Financial Intelligence Centre Act

The sale of a property and the transfer of ownership along with the transfer of significant funds opens itself up to fraudulent activity which is why it is important to familiarise yourself with the risks surrounding money laundering and how the Financial Intelligence Centre Act aims to protect citizens.

The ins and outs of subject to bond approval clauses

What is money laundering?

Money laundering is the process of taking proceeds obtained through unlawful activities such as drug trafficking, insider trading or tax evasion and making them appear legal. In this way, the banks and other financial institutions are unlikely to become suspicious when dealing with these funds, preventing the funds from being confiscated by the authorities. 

While many property transfer scenarios will involve regulated banks and other financial institutions providing low risk, a property transfer remains susceptible to money laundering activities so it is important to be alert and be able to recognise suspicious transactions.

What is considered unlawful activity?

The Prevention of Organised Crime Act defines unlawful activity as “any conduct which constitutes a crime or which contravenes any law whether such conduct occurred before or after the commencement of this Act and whether such conduct occurred in the Republic or elsewhere.”

A person is guilty of money laundering if they assist another person to benefit from the proceeds of the unlawful activities.

The process of money laundering

There are three stages during the process of money laundering:

  • Placement: the proceeds of the unlawful activity are placed in the financial system
  • Layering: a series of transactions is made to obscure the true nature and origin of the proceeds
  • Integration: the proceeds are re-integrated into the financial system as what appears to be legitimate funds and returned to the control of the criminal

Applying this practically in the roles played by property and legal professionals in the property market, they could be involved in all three stages. They may receive the proceeds from a client (potentially resulting in placement), they invest or facilitate the property transaction on behalf of the client (which could facilitate layering) or refund the client if the transaction is cancelled (providing opportunity for re-integration).

What is the main purpose of FICA?

The Financial Intelligence Centre Act (FICA) was introduced to criminalise and combat money laundering and other organised crime. The Act creates the administrative framework for money laundering control. It designates certain statutory bodies and functionaries as “supervisory bodies” and requires them to report suspicious transactions. The Law Society of South Africa has been designated as the attorney’s supervisory board. Accordingly, all attorney firms must comply with the obligations imposed by FICA. The Estate Agency Affairs Board is also a supervisory body in terms of the Act and as such, must be registered with the Financial Intelligence Centre and must adhere to the various duties imposed by FICA. They are accountable institutions because their role is often manipulated by money launderers to disguise the proceeds of unlawful activity.

It is important to have created this responsibility on supervisory bodies in South Africa to protect the integrity and stability of its financial system, allow the country to develop economically and to enable it to be a responsible global citizen.

Follow Snymans on Facebook for more legal information, tips and news about property.