Accountable and Reportable Institutions are required to report suspicious transactions and activities, as well as cash transactions over R24,999 in compliance with the Financial Intelligence Centre ACT (FIC Act or FICA).
The Financial Intelligence Centre (FIC) has published its 2019/2020 report tallying the amount of suspicious transactions reported by industry.
Unsurprisingly, the vast majority are made by Banks, however, digging deeper reveals perhaps just a small glimpse inside the current subterranean world of illicit transactions in South Africa.
Motor vehicles show a high proportion of cash reports. Whilst you may buy and sell a car for cash, the minimum threshold of R24,999+ means older pre-owned vehicle sales by private sellers/buyers won’t be reported. However, there is a concern around the source of funds for higher-value transactions and this may have triggered the FIC to pay closer attention to these businesses over the last year – especially as motor dealers themselves noted a high level of suspicious activity.
Attorneys show a surprisingly high number of cash transactions considering their range of professional services, yet an equally unusual low number of suspicious activity reports. Considering the higher risk activities from asset sale and purchase to criminal defense litigation again, we suspect attorneys will soon be under the FIC spotlight. Similarly, the gambling industry which is traditionally considered higher risk, processed a lot of cash reports, but much fewer suspicions.
Estate Agents show a similar trend. Although it could indicate cash purchase of properties, you would expect to see a similarly high number of cash reports around attorneys transacting the transfer (though that may identify a weakness in attorneys reporting of cash entering their trust accounts). It may show that illicit funds are being used as rental payments for themselves, family or associates, perhaps under the assumption that paying cash to a rental agent would raise less suspicion or be immune to the duty to report.
Foreign Exchange Firms, Money Remitters and Postbanks
Foreign Exchange Firms, Money Remitters and Postbanks reported a relatively high level of cash threshold reports, but low numbers of suspicious reports. This is sometimes the effect of our high cash-based economy where local workers are paid in cash and then put into a day to day cash-based ATM account or send money abroad to support their families.
Analysing these types of reports and statistics can produce valuable insight into the changing trends of financial crime in South Africa as well as the maturity and awareness of the controls in place to combat it.