Amendments to schedules 1,2 and 3 of FICA will see the inclusion of credit providers as accountable institutions.

Webber Wentzel has been tracking the General Laws (Anti-Money Laundering and Combatting Terrorism Financing) Amendment Bill, which was tabled in Parliament in August 2022, along with other amendments. This is as a result of several amendments and proposed changes to the structure of South Africa's anti-money laundering and counter terrorist regime currently under way.

On 12 September 2022, the Select Committee on Finance invited the public to submit written submissions on the draft amendments to Schedules 1, 2 and 3 of the Financial Intelligence Centre Act, 2001 (FICA) submitted in terms of sections 73, 75 and 76 of FICA. The amendments to the schedules intend to amend the list of entities that are deemed to be accountable institutions, supervisory bodies, and reporting institutions under FICA.

Credit providers will be one of the groups to be included as an accountable institution once the amendments are adopted. Considering the scope and application of the National Credit Act, 2005 (NCA) it is important to clarify which type of credit providers will be considered accountable institutions.

The amendments introduce item 11 into schedule 1, which state that:

• a person who carries on the business of a credit provider as defined under the NCA will be an accountable institution; and 
• a person who carries on the business of providing credit in terms of any credit agreement that is excluded from the application of the NCA by virtue of section 4(1)(a) or (b) of the NCA will be an accountable institution.

The first category: a person carrying on the business of a credit provider defined under the NCA, generally applies to every credit agreement between parties dealing at arm’s length and made in, or having an effect in, South Africa. Section 40 of the NCA requires a person to register as a credit provider if the total principal debt owed to that credit provider under all outstanding credit agreements, other than incidental credit agreements, exceeds the ZAR 0 threshold, as determined by the minister of trade and industry. If a person provides credit as defined in the NCA, they are required to register as a credit provider with the National Credit Regulator. This means any person registered as a credit provider under the NCA will be considered an accountable institution and must comply with the provisions of FICA.

The second category: a person who is excluded from the application of the NCA by virtue of section 4(1)(a) and (b) of the NCA,provides that the NCA does not apply to credit agreements where the consumer is:

• a juristic person whose asset value or annual turnover, together with the combined asset value or annual turnover of all related juristic persons, at the time the agreement is made, equals, or exceeds ZAR 1 million;
• the state; or 
• an organ of state.

Section 4(1)(b) of the NCA provides that the NCA does not apply to credit agreements where the consumer is juristic person whose asset value or annual turnover, together with the combined asset value or annual turnover of all related juristic persons, at the time the agreement is made, is below ZAR 1 million and the principal loan amount under the credit agreement is an amount that exceeds ZAR 250 000 (i.e. large credit agreements as defined under the NCA).

The amendments to the FICA schedules now mean that although the credit providers who provide credit to consumers described in section 4(1)(a) and (b) would not fall within the ambit of the NCA, such credit providers will be considered accountable institutions for the purposes of FICA and must comply with the provisions of FICA.

Public comments on the draft amendments to schedules 1, 2 and 3 should be emailed to Mr. Nkululeko Mangweni at nmangweni@parliament.gov.za by no later than 12h00 on Monday, 19 September 2022. Members of the public who wish to make submissions at the public hearings (which will be held on Zoom) on Tuesday, 20 September 2022, should specifically request this by sending an email to nmangweni@parliament.gov.za. 

Written by Lerato Lamola-Oguntoye, Dawid de Villiers and Kent Davis from Webber Wentzel