Risk Management And Compliance Programme Template In Terms Of

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Risk Management And Compliance Programme Template In Terms Of

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RISK MANAGEMENT AND COMPLIANCE PROGRAMME TEMPLATE IN TERMS OF THE FINANCIAL INTELLIGENCE CENTRE ACT, 38 OF 2001
ESTATE AGENCY ENTERPRISES

Risk Management and Compliance Programme template developed by the Estate Agency Affairs Board

Date of issue: 01 April 2019

1

TABLE OF CONTENTS
Definitions 1. Introduction 2. Purpose 3. Objectives 4. Senior management 5. Risk 6. Risk –based approach 7. Internal controls 8. Scope and Application 9. Risk Management and Compliance Programme 10. Schedule

Pages
3 - 5 6 6 7 7 7 7 - 8 9 9 10 - 30 31 - 34

Risk Management and Compliance Programme template developed by the Estate Agency Affairs Board

Date of issue: 01 April 2019

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DEFINITIONS

Definition of Key Terms

Act

The Estate Agency Affairs Act, 112 of 1976, and the regulations

promulgated in terms of section 33 thereof.

Accountable Institution

A person referred to in Schedule 1 of the FIC Act.

Auditors

Persons registered as an accountant and auditor in terms of section 23 of the Public Accountant and Auditors Act, 80 of 1991, and engaged in practice as such.

Board Compliance

The Estate Agency Affairs Board established in terms of section 2 of the Act. Conformity with legislative requirements of the Act.

Compliance monitoring and Any measures that may be implemented by the Board from

assessment framework

time to time to monitor and assess compliance by accountable

institutions with the provisions of the Act.

Contravention Controlling ownership interest CTR CTRA
Customer Effective Control
Estate Agent
FIC FICA

Non-compliance with the legislative requirements of Estate Agency Affairs Act and the Financial Intelligence Centre Act The ability of a legal person, by virtue of voting rights attaching share holdings, to take relevant decisions and pass resolutions. The cash threshold report submitted in terms of section 28 of the FIC Act. The cash threshold report submitted in terms of section 28 of the FIC Act where transaction values have been aggregated and add up to the total of the prescribed threshold value. A person who has indicated a wish to enlist the service of the estate agency firm. The ability to materially influence key decisions relating to a legal person or the ability to take advantage of the capital or assets of a legal person. Any person as defined as such in section 1(vi) of the Act and/or regulation 2 of the Specification of Services Notice published under Government Notice R1485 of July 1981. The Financial Intelligence Centre established in terms of section 2 of the FIC Act. The Financial Intelligence Centre Act, 38 of 2001, as amended.

MLTFC POCDATARA Prospective Client

The Money Laundering and Terrorist Financing Control Regulations in terms of section 77 of the FIC Act. The Protection of Constitutional Democracy Against Terrorism and Related Activities Act, 33 of 2004. A person who has indicated a wish to enlist the estate agency services of an estate agency enterprise but who is unlikely either to transfer any value to the enterprise or has not firmly indicated a readiness to transfer value to the enterprise.

Risk Management and Compliance Programme template developed by the Estate Agency Affairs Board

Date of issue: 01 April 2019

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Risk
Risk based approach
Risk Factors RMCP Senior Management
Source of funds Source of wealth Supervisory Body POCA Report SAR STR TFAR TFTR

The impact and likelihood of money laundering and terrorist financing taking place including the inherent risk or level of risk that exists before mitigation but not the residual risk or the level of risk still remaining after mitigation. The approach pursuant to which an accountable institution identifies, assess and understands the money laundering and terrorist financing risks to which the enterprise is exposed and implements appropriate anti- money laundering and counterterrorist financing measures proportionate to those risks. Variables that, either on their own or together, may increase or decrease the money laundering and terrorist financing risks posed by an enterprise relationship or a single transaction. The Risk Management and Compliance Programme of an accountable institution in terms of section 42 of the FIC Act. The senior official whose approval is required for purposes of the FIC Act having sufficient seniority and oversight to take informed decisions concerning the enterprise’s compliance with the FIC Act such as to actually bind the enterprise to those decisions. The origin of the funds involved in an enterprise relationship or a single transaction including the activities that generated the funds used in the enterprise relationship. The activities that have generated the total net worth of the client such as those that produced the client‘s funds and property or which are derived from an inheritance or savings. A functionary or enterprise referred to in Schedule 2 of the FIC Act which Schedule includes, inter alia, the Estate Agency Affairs Act, 112 of 1976. The Prevention of Organised Crime Act, 121 of 1998.
The person or entity that makes a FIC report.
A suspicious or unusual activity report submitted to the FIC in terms of section 29(1) or 29(2) of the FIC Act. A suspicious or unusual transaction report submitted to the FIC in terms of section 29(1) of the FIC Act. A terrorist financing activity report submitted to the FIC in terms of section 29(1) or section 29(2) of the FIC Act. A terrorist financing transaction report submitted to the FIC in terms of section 29(1) of the FIC Act.

Risk Management and Compliance Programme template developed by the Estate Agency Affairs Board

Date of issue: 01 April 2019

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1. INTRODUCTION
The Financial Intelligence Centre Act, 38 of 2001, established the Financial Intelligence Centre as the national centre for the gathering and analysis of financial data. The FIC is mandated to identify funds generated from criminal acts and to combat money laundering and terrorist financing. The FIC Act imposes certain obligations on sectors deemed vulnerable to money laundering and terrorist financing by compelling those sectors to report the FIC.
The gathering of information and reporting of developments is reliant on the compliance of institutions and the submission of reports to the FIC from the identified sectors. As the FIC is the only entity authorised to gather and analyse transactions and financial data it is placed at a pivotal point to assist the tax authorities, law enforcement, investigating agencies and other competent authorities with necessary information to identify criminals and bring them to justice.
The FIC discharges this important mandate by developing and providing financial intelligence to a range of agencies, supporting the investigation and prosecution of criminal activity and identifying the proceeds of crime and combating money laundering and the financing of terrorism.
2. PURPOSE
The Risk Management and Compliance Programme (“RMCP”) establishes guidelines and procedure to ensure full compliance with the FIC Act in identifying, measuring, monitoring, managing and reporting the material risks to which the enterprise may be exposed.
Section 42 of the FIC Act obliges estate agency enterprises to develop, document, maintain and implement a RMCP. Doing so ensures that management implements appropriate legal compliance programmes and adheres to areas of accountability thereby preventing money laundering and terrorist financing and efficiently allocating resources to meet the FIC requirements. The RMCP, accordingly, addresses and counters the money laundering and terrorist financing risks that may be faced by the enterprise.
The RMCP comprises policies, procedures, systems and controls to be implemented by, and within, estate agencies for this purpose.

Risk Management and Compliance Programme template developed by the Estate Agency Affairs Board

Date of issue: 01 April 2019

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3. OBJECTIVE
Estate agents are accountable institutions in terms of the FIC Act and, as such, are required fully to comply with the FIC Act. The property sector has historically been used both to hide illegally obtained funds and as a vehicle through which criminals are able to introduce their illegally gotten proceeds into the financial system. Estate agency enterprises, consequently, should strive to create, promote and build a culture of compliance with the FIC Act and the Money Laundering and Terrorist Financing Control Regulations.
4. SENIOR MANAGEMENT RESPONSIBILTITY AND ACCOUNTABILITY
The Board of directors, senior management or persons having the highest level of authority within an enterprise have the ultimate responsibility of ensuring that the enterprise maintains an effective internal anti-money laundering and counter-terrorist financing structure through the application of an appropriate RMCP. Such persons must not only ensure compliance by estate agency enterprises and their management and staff with the provisions of the FIC Act and the enterprise RMCP but also establish a corporate culture of compliance with the FIC Act and the Money Laundering and Terrorist Financing Control Regulations. Such persons are also obliged to ensure that these compliance functions are assigned to a person or persons having sufficient competence and seniority within the enterprise to ensure the effectiveness of its compliance functions.
5. RISK
The FIC Act requires estate agency enterprises to apply a risk-based approach when performing mandatory client due diligence measures. Risk refers to the likelihood and impact of uncertain events on set objectives and derives mainly from threat, vulnerability and consequence. While threat may potentially cause harm in the context of money laundering and terrorist financing vulnerability comprises those things that can be exploited by the threat or which may support or facilitate that threat and consequence reflect the impact of the threat or the exploitation of vulnerability should the impact actually materialise.
6. RISK–BASED APPROACH
The FIC Act incorporates a risk-based approach to compliance requirements such as client due diligence, record keeping, reporting, and so forth. Estate agency enterprises must not only fully understand but also appreciate their potential exposure to money laundering and terrorist financing risks in the sector within which they operate.

Risk Management and Compliance Programme template developed by the Estate Agency Affairs Board

Date of issue: 01 April 2019

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The risk-based approach requires estate agency enterprises to identify and assess the risk of doing business with their customers with a view to deciding how best to manage that risk. Estate agency enterprises have now been accorded a greater discretion in determining the appropriate compliance steps for themselves. They must nevertheless ensure that adequate processes, proportionate to the size and complexity of the enterprise, are in place to identify and assess money laundering and terrorist financing risks. Estate agency enterprises are required to have a thorough understating of the risks associated with their business and to indicate how they plan to manage these identified risks across their client base.
The risk-based approach, in general terms, covers the following phases:
Phase I - risk identification
Identifying money laundering risks requires estate agency enterprises to implement appropriate measures to mitigate the identified risks. Where the risk of possible money laundering abuse is assessed to be higher they must ensure that implemented systems and controls provide for the obtaining of necessary additional information about clients, applying secure confirmation of clients information and conducting closer scrutiny regarding client transaction activities. Where there is a lower risk a simplified due diligence process, allowing for the obtaining of less information or a lesser frequency of scrutiny, may be conducted.
Phase II - risk assessment
When undertaking a risk assessment different categories will be assigned to the different levels of money laundering risk according to the risk scale that is used. The risk scale must be tailored to the size, complexity and circumstances of the individual estate agency enterprise. The complexity of the risk scale will, thus, reflect the size and complexity of the enterprise as well as its nature and the range of products and services that it offers. The assessment of money laundering risk should take account of all factors deemed to be relevant to an engagement with particular clients
Phase III - risk management
In developing a risk management framework estate agency enterprises must be mindful of: events, products and services that may result in an increased money laundering and terrorist financing risk; the internal control activities necessary to mitigate money laundering and terrorist financing risk; and residual risks to indicate levels of comfort as to whether or not the enterprise is sufficiently managing the probability and impact of the risk occurring. Estate agency enterprises are responsible for ensuring that money laundering

Risk Management and Compliance Programme template developed by the Estate Agency Affairs Board

Date of issue: 01 April 2019

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risks are effectively managed. The controls that are implemented should be sufficient to detect any money laundering or terrorist financing risks and respond appropriately thereto.

Phase IV - risk mitigation

Risk mitigation, in the context of money laundering, refers to the activities and methods used by estate agency enterprises to control and minimise the identified money laundering and terrorist financing risks.

Phase V – risk monitoring

Risk monitoring requires estate agency enterprises continually to monitor the effectiveness of the control mechanisms and to engage in an ongoing review of the risk assessment to ensure the FIC requirements are complied with.

7. INTERNAL CONTROL

The role of internal control is to manage identified risks and ensure that enterprise opportunities are maximised and that potential losses associated with unwanted events are reduced. Estate agency enterprises are required to devise control frameworks as a standard against which the effectiveness of internal systems of control can be assessed.

8. SCOPE AND APPLICATION

Estate agency enterprises must appoint a person, or persons, having sufficient competence to assist that enterprise in complying with the provisions of the FIC Act and the enterprise RMCP. The Board of directors, senior management or persons having the highest level of authority within the enterprise are responsible for ensuring that the enterprise maintains an effective internal anti-money laundering structure through the application of an appropriate RMCP. The RMCP should provide a detailed description of how the compliance obligation is to be undertaken within the enterprise.

The RMCP endeavours, amongst others, to ensure that the enterprise has processes and internal controls in place to meet the compliance requirement of the FIC Act and make specific reference to:

 Client identification and verification

 Record keeping

 Reporting

 RMCP

 Person responsible for compliance

Risk Management and Compliance Programme template developed by the Estate Agency Affairs Board

Date of issue: 01 April 2019

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 Training of employees  Registration with the FIC.
The RMCP, policies, procedures and processes of the estate agency enterprise must be:
 Designed to limit and control the risk of money laundering and terrorist financing;  Fully consistent with the law; and  Fully adhered to by all enterprise management and staff.
The RMCP describes the accountability of the board of directors or senior management and provides for the appointment of a person, or persons, with adequate seniority and experience within the enterprise to ensure its compliance with the FIC Act.
The RMCP indicates how the function of managing the establishment and maintenance of effective anti-money laundering and counter-terrorist financing systems and controls will be discharged within the estate agency enterprise.
The RMCP must clearly indicate how the estate agency enterprise intends providing ongoing training to its employees to enable them to comply with the provision of the FIC Act.
The RMCP must be commensurate with size, complexity and nature of the estate agency enterprise.
The nature and extent of the internal systems and controls of an estate agency enterprise, which form an integral part of the RMCP, is dependent on such factors as the:
 Nature, scale and complexity of the business of the enterprise;  Diversity of its estate agency operations, including geographical diversity;  Client, product and/or service profile of the enterprise;  Distribution channels used by the enterprise;  Volume and size of estate agency transactions conducted by the enterprise; and  Degree of risk associated with each area of the estate agency operations of the
enterprise.

Risk Management and Compliance Programme template developed by the Estate Agency Affairs Board

Date of issue: 01 April 2019

9

RISK MANAGEMENT COMPLIANCE PROGRAMME- SCHEDULE

PROVISIONS OF THE FIC AMENDMENT ACT

PROCESSES AND PROCEDURES IN PLACE

LOW – MEDIUM - TO HIGH RISK RATING

RISK MANAGEMENT AND COMPLIANCE PROGRAMME Section 42(1):
 an accountable institution must [formulate] develop, document, maintain and implement a programme for the anti-money laundering and counter- terrorist financing risk management and compliance;
 the establishment and verification of the identity of persons whom the institution must identify in terms of Part 1 of this Chapter;
 the information of which record must be kept in terms of Part 2 of this Chapter;
 the manner in which and place at which such records must be kept;
 the steps to be taken to determine when a transaction is reportable to ensure the institution complies with its duties under this Act; and
 such other matters as may be prescribed] a programme for anti- money laundering and counter- terrorist financing risk management and compliance;

Establishment and verification of natural person. An estate agency shall determine the natural person identity with reference to such basic attributes as the person’s full names, date of birth, identification number(ID), passport number, work permit, visa, etc. issued by government source.
When using an electronic data source the estate agency must apply the same test as that used for documentary sources, namely, that the source is a reliable and independent thirdparty source.
Establishment and verification of legal persons, trust, and partnership An estate agency shall establish the nature of the client’s business, the ownership and control structure of the client, the beneficial owners of the client and the identity of the beneficial owners of the client.

VERY IMPORTANT: Estate Agency Enterprises are expected to identify the level of their risk and attach thereto weight appropriate to their risk
EnterpriseMoney LaunderingTermsRiskEstate Agency Enterprises