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Proposed amendments to FICA - crypto & high value goods

The Minister of Finance has issued a consultation paper regarding proposed changes to the FIC Act.

The process aim of amending the Act is to widen the application of the Act by bringing more businesses under its scope to better align with FATF requirements and help address the use of cryptocurrencies and high-value goods in money laundering activities.

The key proposed changes are summarised below:

Proposed amendments to Schedule 1 (Accountable Institutions): Expansion of the Schedule 1 list of Account Institution entities subject to the customer due diligence, risk management and compliance obligations set out in FICA.

These entities will include: crypto asset service providers (CASP's) , "high-value goods dealers" and co-operative banks.

Proposed amendments to Schedule 2: The respective supervisory bodies currently responsible for supervising non-financial accountable institutions have been removed (e.g. the National Gambling Board) and will become the responsibility of the Financial Intelligence Centre.

Deletion of Schedule 3: As a result of the inclusion of the “high value goods” category of entities in Schedule 1, Schedule 3 will be deleted and the current reporting institutions (motor vehicle and Krugerrand dealers) will now be included in the new category of high value goods dealers under Schedule 1.

Inclusion of Crypto Asset Service Providers (“CASPs”) in Schedule 1 As initially proposed in the “crypto asset policy paper” published by the Inter-governmental Fintech Working Group in January 2020, the proposed amendments to Schedule 1 of FICA will include a new item, “crypto asset service providers”. The proposed amendment is in line with South Africa’s obligation to adhere to FATF Recommendations 15 (New Technologies) which was amended in 2018 to address the treatment of “virtual assets”. The proposed amendment comprises of two parts:

The term “crypto assets” is given the following definition of “a digital representation of perceived value that can be traded or transferred electronically within a community of users of the internet who consider it as a medium of exchange, unit of account or store of value and use it for payment or investment purposes and includes products and services related to:

  • exchanging a crypto asset for a fiat currency or vice versa;

  • exchanging one form of crypto asset for another;

  • conducting a transaction that moves a crypto asset from one crypto asset address or account to another;

  • safekeeping or administration of a crypto asset or an instrument enabling control over a crypto asset; and

  • participation in and provision of financial services related to an issuer’s offer or sale of a crypto asset.

It does not appear to include a digital representation of a fiat currency or a security as defined in the Financial Markets Act, 2012 (Act 19 of 2012)”.

Effect of the proposed amendment

The effect will be that all these businesses will be regarded as “accountable institutions” and will be required to comply with the various regulatory requirements and obligations imposed on “accountable institutions” by FICA, which include:

  • Registering as an “accountable institution” with the FIC;

  • Conducting a due diligence/KYC on all customers in accordance with a risk-based approach; and

  • Developing, implementing and maintaining a Risk Management and Compliance Programme (“RMCP”).

You can view the official documentation here