FIC takes a bigger stick to lawyers and estate agents over grey list
Foreigners used expensive property to wash their dirty money, but some estate agents 'are now so wrapped up in red tape' that criminals may slip through the net. Picture: AdobeStock
The Financial Intelligence Centre (FIC) is carrying out hundreds of inspections and issuing sanctions against estate agents and law offices over their failure to submit risk and compliance reports.
SA was placed on the Financial Action Task Force (FATF) grey list in early 2023 for lapses in taking the necessary action to combat money laundering and terrorist financing, with estate agents and legal practitioners identified as two of the higher-risk categories.
There is a fear that lawyer and estate agent trust accounts could be used to launder criminal proceeds or finance terrorism.
There has been an improvement in compliance rates to around 70% from the 52% for legal practitioners and 42% for estate agents announced in February 2024, but this is still not where it needs to be to remove SA from the grey list.
In response to queries from Moneyweb, the FIC says it conducted 165 inspections on estate agents and 242 on legal practitioners over the 2025 financial year. This resulted in sanctions being issued against 87 estate agents and 83 legal practitioners.
ALSO READ: Financial Intelligence Centre: Lawyers and estate agents keeping SA on grey list
'South Africa has largely addressed 20 of the 22 action items outlined by the Financial Action Task Force in its action plan for the country. The country's efforts continue to drive South Africa's exit from the grey list,' says the FIC in an emailed response.
Other high-risk sectors include high value goods dealers, such as those dealing in precious stones, precious metals and Krugerrands, and trust service providers (such as accountants).
These are 'designated non-financial businesses and professions' or DNFBPs that are not traditional financial institutions but are considered to be at risk of being used for money laundering and terrorist financing.
These bodies are required to submit regular risk and compliance reports to the FIC to help it monitor and control money laundering and terrorism financing.
ALSO READ: Prudential authority fines Absa R10 million for FICA non-compliance
SA inching its way off the list
In January, it was announced that SA had largely complied with 20 of the 22 issues that got it placed on the grey list in 2023 and was expected to be fully compliant with the FATF requirements by October 2025.
National Treasury undertook to ensure that anti-money laundering and counter-terrorism financing supervisors implement follow-up remedial actions 'and that effective, proportionate and dissuasive sanctions are being applied'.
The FATF found SA's laws against terrorism financing and money laundering were largely sufficient, but their enforcement was weak.
In February this year, the South Gauteng High Court issued a freezing order against two individuals and two entities based on reasonable grounds of suspicion that they had been involved in committing an act of terrorism under the Protection of Constitutional Democracy Against Terrorist and Related Activities Act.
Christopher Malan, executive manager for compliance and prevention at the FIC, commented in April that SA had not fully complied with its FATF commitments due to non-financial businesses and practitioners' understanding of their own risk and compliance situation.
Estate agents hit back last year, saying that while they supported efforts to improve compliance rates, the FIC appeared to be operating on incorrect data, with many estate agents ceasing to operate without advising the FIC.
ALSO READ: FSCA fines Ninety One Fund Managers R3 million for Fica non-compliance
The grey list makes it more difficult for SA companies to access overseas capital and imposes higher due diligence standards when dealing with foreign businesses and banks.
Research and advisory group Krutham (formerly Intellidex) estimated that this could cost the economy 1% of GDP a year in an optimistic scenario, and 2-3% in a more pessimistic one.
Some of the criticism being directed at lawyers and estate agents could be directed at banks, which enabled the flow of billions of rands during state capture.
Some estate agents argue that they are now so wrapped up in red tape that criminals are able to slip through the net.
Research by Open Secrets revealed a pattern of money laundering by politically connected individuals from Mozambique, the Democratic Republic of Congo and Equatorial Guinea where expensive properties, often bought with public funds, were being purchased in affluent suburbs in Cape Town and Johannesburg.
This article was republished from Moneyweb. Read the original here.
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