The Financial Intelligence Centre Act and the cash threshold

The Financial Intelligence Centre Act (FICA) was established to identify proceeds of unlawful activities and to combat money laundering, terrorist funding and tax evasion. It further establishes a Financial Intelligence Centre and a Money Laundering Advisory Council in order to combat money laundering activities and to impose certain duties on institutions and other persons who might be used for money laundering purposes.

 

To combat these illegal threats, South African law has implemented control measures aimed at assisting in its detection and investigation. These control measures are embodied in the Financial Intelligence Centre Act, 38 of 2001 and can be described as follows:

• Individuals need to know who they are doing business with;
• The financial paper trail of all transactions within a business need to be kept and preserved;
• Suspected money laundering transactions need to be reported to the Financial Intelligence Centre.

 

The Financial Intelligence Centre (FIC) recently upped the cash threshold in terms of section 28 of the Act. Previously, accountable institutions were obligated to report cash transactions in excess of R24 999.00. However, this threshold amount was changed in October 2022 and has been increased to R49 999.00, with a reporting timeframe of three days.

 

The threshold for reporting cash transactions is contained in the Money Laundering and Terrorist Financing Control (MLTFC) Regulations. In terms of the revised threshold, accountable and reporting institutions will be required to report any cash transactions of R50 000 and above to the FIC. Cash threshold reporting is one of several regulatory reporting obligations for accountable and reporting institutions listed in Schedule 1 and Schedule 3 to the FICA respectively.

 

In the 2021/22 financial year, the FIC received more than 4.5 million cash threshold and cash threshold aggregation reports from accountable and reporting institutions. Other regulatory reporting streams in terms of the Act include suspicious and unusual transaction reports (section 29), and terrorist property reports (section 28A). It is important to note that all businesses, whether listed in the Act or not, are obliged to report transactions and/or activities that are deemed suspicious and unusual.

 

What is deemed to be a cash transaction?

Cash is defined as “coin and paper money of the Republic or of another country that is designated as legal tender and that circulates and is customarily used and accepted as a medium of exchange in the country of issue”.  It is therefore important to note that “cash” does not include the transfer of funds by means of electronic funds transfer, wire transfer or any method that does not involve the physical transfer of cash.  It is also important to note that accountable institutions are obligated to report cash payment aggregates of smaller deposits or payments that together exceed the cash threshold of R 49 999.00.

 

How to report cash transactions to the FIC

Reporting a cash transaction must be filed with the FIC electronically by making use of the Internet-based reporting portal specifically provided for this purpose at www.fic.gov.za. It is important to keep records of all reports filed with the FIC. This can assist if it later transpires that the accountable institution’s client was involved in money laundering.

 

What happens if I don’t report cash threshold the FIC?

An accountable institution that fails to submit a cash threshold report or cash threshold report aggregation when required to do so is guilty of an offence. Failure to submit the required reports results in non-compliance and is subject to an administrative sanction.

Any person convicted of an offence is liable to imprisonment for a period not exceeding 15 years or to a fine not exceeding R 100 million.

 

For more information: Michelle Orsmond – MichelleO@hammondpole.co.za