Previously, Motor Vehicle Dealers (MVDs) were listed as Reporting Institutions in the Financial Intelligence Centre Act (FICA). The FIC changed gears with their December 2022 FICA Schedule 1 amendments, and in certain instances 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.
A HVGD is a person (both natural and juristic) that conducts business by dealing with high value goods and receives payments of R100 000.00 or more in single or multiple payments for such goods. In order to fall within this category, the good(s) should be any single item valued at R100 000.00 or more.
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Beyond being an essential mode of transport, motor vehicles are deemed as a symbol of status for some which renders 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 sizable 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:
- Purchases of motor vehicles using large cash amounts
- Purchasing 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 pays a substantial down payment in cash and the balance is financed by an unusual source; for example a third party or a private lender
You can read more about the inherent risks to MVDs here.
FICA Requirements for Motor Vehicle Dealer
There’s more to FICA compliance than document collection and verification. To be fully compliant, Accountable Institutions should comply with all obligations set out by the FIC. This includes:
- 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 as 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 i.e. 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. AIs also need to risk assess their products and services to determine how they may be used for ML, TF and PF. In the instance of MVDs, the above outlined risk indicators amongst other factors could provide some guidelines on conducting that business level risk assessment.
Risks of Non-Compliance
FICA non-compliance may attract a fleet of troubles that include 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. The financial implications and possible reputational risk which stems from non-compliance is a stark reminder about the benefits of full compliance which include, peace of mind, a secure business environment; as well as the satisfaction of doing your bit to put the brakes on financial crime, amongst others.
Not a lot of businesses have the financial muscle, time and expertise to ensure that they are fully compliant outside of external assistance. Using an end-to-end FICA solution like DocFox, not only allows you to focus on what you do best, which is to provide your customers with the right set of wheels, but it also relieves you of what may feel like a wheel within a wheel kind of exercise, affording you a smooth drive through FICA compliance!
