INTERNATIONAL FUNDS TRANSFER REPORT
On 18 August 2023, following the issuance of a notice in the Government Gazette, the amendment of Section 56 of the Financial Intelligence Centre Amendment Act of 2017 came into effect. This amendment is explained by the FIC’s Draft Guidance Note 104A, issued on 18 January 2023, as well the FIC’s International Funds Transfer Reports user guide, dated 9 February 2023.
In essence, Section 43 of FICA introduces an amendment to Section 56 within the Act. This Section deals with the repercussions when an accountable institution, as mandated, fails to report the prescribed information concerning cross-border electronic funds transfers (EFT’s).
This amended Section 56 now includes a sub-section (2) which specifies that if an accountable institution fails to report the prescribed information related to an electronic money transfer in accordance with Section 31, it not only becomes liable for an offense but is also considered non-compliant and subject to an administrative penalty.
The requirements
Section 31 of FICA imposes an obligation on accountable institutions to submit an international funds transfer report (IFTR) -
• within three days of the transaction or transfer date, when conducting electronic money transfers.
• This report must be submitted directly to the Financial Intelligence Centre (FIC).
• These electronic money transfers must be moved on behalf, or on the instruction, of another person,
• across South African borders,
• involving amounts of R20 000 and above (excluding transaction fees).
Who must Report?
The obligation to report international fund transfer transactions exceeding the prescribed threshold applies solely to specific categories of accountable institutions authorized to conduct the business of cross-border electronic funds transfers, for example authorised dealers (banks), the Post Office, authorised dealers with limited authority (remittance and forex dealers), FSP’s that have a direct reporting dispensation under the Exchange Control Regulations and the South African Postbank, etc.
These FSP’s will, in terms of the Exchange Control Regulations, be authorised by the Treasury in accordance with conditions as the Treasury may impose, to do the following:
• Take or send out of the Republic any bank notes, gold, securities or foreign currency, or transfer any securities from the Republic elsewhere.
• Send, consign or deliver any bank notes, gold, securities or foreign currency to any person for the purpose of taking, sending or removing such bank notes, gold, securities or foreign currency out of the Republic.
• Take any South African bank notes into the Republic or send or consign any such notes to the Republic.
• Make any payment to, or in favour, or on behalf of a person resident outside the Republic or place any sum to the credit of such person.
• Draw or negotiate any bill of exchange or promissory note, transfer any security or acknowledge any debt.
• Grant any financial assistance to any person in the Republic, where as security for such financial assistance, the person granting the financial assistance in turn relies on any security, guarantee, undertaking or financial assistance, directly or indirectly furnished by –
(i) any person resident outside the Republic; or
(ii) an affected person.
• Grant any financial assistance to any person in the Republic, where such person –
(i) is not resident in the Republic; or
(ii) is an affected person.
Failure to Report?
The IFT Report must contain the specified details as stipulated in Regulation 23E of the Money Laundering and Terrorist Financing Control Regulations. Failure to adhere to these provisions constitutes an offense, subject to potential penalties including imprisonment for up to three years or a fine of up to R1 million.
Additionally, failure to submit an IFTR within the stipulated timeframe classifies the entity or individual as non-compliant and subjects them to administrative sanctions, which may involve financial penalties reaching up to R10 million for individuals and R50 million for legal entities.
