Real estate industry called to action as compliance failures put economy at risk
In an article released by BusinessTech on Wednesday 14 February, it was revealed that real estate is one of two industries standing in the way of South Africa’s efforts to get off the Financial Action Task Force’s (FATF’s) grey list.
South Africa was placed on the FATF’s grey list in February 2022 as a result of the country’s inadequate controls for the prevention of financial crimes like corruption, money laundering and terrorism financing. The country was given until January 2025 to implement the FATF’s 22 directives and address the eight strategic deficits identified.
On Wednesday, the FIC’s Executive Manager of Compliance and Prevention, Christopher Malan, revealed that two of the 22 directives are now at risk of failure due to ongoing non-compliance from real estate agents and legal practitioners.
The directives in question are Directive 2A, requiring the identification of high-risk entities, and Directive 2B requiring the investigation of these entities.
Should these directives not be met by May 2024 and September 2024, respectively, the chances of meeting the FATF’s requirements to be removed from the grey list by 2025 would rapidly – and potentially irrevocably – decline.
Where is real estate falling short?
As relatively easy avenues for money laundering, the real estate and legal industries have both been tasked with analysing and reporting on the risk profiles of their clients. In 2023, the FIC requested each Estate Agent registered as an accountable institution with the FIC to complete and submit a FIC Questionnaire to the FIC in the form of a Risk and Compliance Return (RCR) which would advise and give the FIC information on the real estate sector’s understanding and implementation of the FIC and its FIC obligations – a critical component of Directive 2A. This RCR was due to be submitted by Estate Agents by 31 May 2023. Failure to do so not only places real estate businesses at risk of hefty non-compliance fines, but also hinders the FIC’s ability to fulfil Directive 2A and 2B – investigate the high-risk entities in question.
“Filing RCRs is nobody’s idea of a good time,” says Tony Clarke, MD of the Rawson Property Group and former Chairperson of Real Estate Business Owners South Africa. “As professionals in a high-risk industry, however, it’s our responsibility to ensure we are not inadvertently facilitating criminal activity.”
