Vehicle dealers: From Reporting to Accountable Institutions

MVDs are no longer Reporting Institutions, but are now considered Accountable Institutions by Financial Intelligence Centre (FIC) and are required to fully comply with FICA.

The FIC changed gears with its December 2022 FICA Schedule 1 amendments, and in certain instances is steering motor vehicle dealers into the high-value goods dealers (HVGDs) category, as Accountable Institutions (AIs).

The FIC considers MVDs to be any person who is engaged in the business of buying, selling or exchanging any self-propelled vehicle, including a vehicle having pedals and an engine, or an electric motor as an integral part thereof or attached thereto and which is designed or adapted to be propelled by these means on land, as well as any trailer and caravan.

An HVGD is a person (both natural and juristic) that conducts business by dealing with high value goods and receives payments of R100 000 or more in a single or in multiple payments for such goods. In order to fall within this category, the goods should be any single item valued at R100 000 or more.

Beyond being an essential mode of transport, motor vehicles are deemed to be symbols of status for some, which render MVDs prone to being targeted by criminals, as a possible avenue for dispensing ill-gotten funds.

Whilst buying a motor vehicle may require a degree of financial commitment and a sizeable investment for the average individual, for people who make their money through crime, motor vehicle purchases can present an easy option for using their proceeds. Although the motor vehicle industry is a big contributor to the economy, the fact that it is cash intensive does not help jam the engines of financial crime.

As a motor vehicle dealer, it is important to know what FICA requires of you, your dealers and your dealership.

Some of the risk indicators of money laundering within the MVDs space may include but are not limited to:

• Purchasing of motor vehicles using large cash amounts;
• Purchasing of motor vehicles in cash or through successive deposits in the accounts of the motor vehicle dealers;
• Purposely defaulting payment of instalments and later settling the loan using lump sum payments (cash, wire transfers, or a series of transactions);
• Customer makes a substantial down payment in cash and the balance is financed by an unusual source; for example, a third party or a private lender.

FICA Requirements for Motor Vehicle Dealers:

• MVDs are expected to register with the FIC via the FIC’s electronic registration and reporting portal – goAML
• MVDs are required to submit cash threshold reports on the goAML platform for all cash transactions exceeding R49 999.99
• MVDs are required to submit suspicious activity/transaction reports on the goAML platform for all activities and transactions that are deemed suspicious.
• MVDs will need to consider and address the FIC’s 7 key compliance obligations when putting together their Anti-Money Laundering (AML)/Combating the Financing of Terrorism (CFT) regime.

How FICA Regulations Impact Motor Vehicle Dealers and their operations:

The underlying premise of FICA compliance obligations is that AIs follow a risk-based approach (RBA) when establishing and verifying the identity of a client. To do this, institutions need to assess their new and/or existing clients in terms of the risk they pose to their business, for example, their products and services.

The result of this assessment is used by MVDs to risk rate their clients which, in turn, informs the level of due diligence that would be applied to manage the Money Laundering (ML), Terrorist Financing (TF) and Proliferation Financing (PF) Risk posed by clients to their business.

Risks of non-compliance:

FICA non-compliance may attract a fleet of trouble, including administrative sanctions. These sanctions include, amongst others, a caution and/or restricting the business activities of the institution and/or a financial penalty of up to R10 million for a natural person or up to R50 million for a legal person per instance of non-compliance. However, future non-compliance can lead to imprisonment for a period not greater than 15 years or a fine that does not exceed R100 million.

To date, 83 MVDs have received sanctions from the FIC, 90% of which had financial implications of nothing less than R100 000.00. All the sanctioned parties are also listed on the FIC’s website, which is freely accessible to the general public.

Using an end-to-end FICA solution like DocFox, allows you to focus on what you do best, while guiding you through FICA compliance. In this regard, DocFox will be hosting free 1-hour webinars where MVDs can find out if their businesses are classified as Accountable Institutions and to discover the obligations required to ensure full FICA compliance.

The next webinar is on 27 September 2023 at 10:00 where topics like New Accountable Institutions that need to comply with FICA; Steps required to be fully FICA compliant; Consequences of FICA non-compliance and the Latest FICA changes and new directives you should be aware of, will be discussed. Follow this link to register:

https://us02web.zoom.us/webinar/register/8116939078964/WN_9eE1Mwi-RxuTeh4cEicVJA#/registration