ESTATE agents who are now required to report suspicious trans-actions under new legislation targeting money laundering and tax evasion have been advised to treat this newly-imposed duty with great circumspection. In a legal update seminar hosted by the Estate Agency Affairs Board in Cape Town, Professor Henk Delport of the University of Port Elizabeth said the new Financial Intelligence Centre Act required several institutions, including estate agencies, to be the eyes and ears of the Finance Department and the Treasury.

But it posed the danger of creating an unhealthy situation in which people started spying on each other. "Don't over-react, don't run to the Receiver every time you smell a rat," said Professor Delport. He said the board did not want the estate agency industry to be tainted by a climate of suspicion. "The duty to report a suspicious transaction applies only when you know or suspect that something untoward is going on, not when you wonder about it. There must be factual grounds for the suspicion." He said the Financial Intelligence Centre Act was vitally important for estate agents. "The whole system is driven by fear," Professor Delport said, "because it carries severe penalties of a R10 million fine and 15 years' imprisonment."

He said only in extreme cases would these types of sentences be imposed. Two of the most important duties imposed on estate agents by the act are the "know your client requirements" - to identify clients, verify their identities and keep records - and to report suspicious transactions. The duty to report suspicious transactions has been in force since February 3 and the requirement to supply information on client identity will come into force on June 30. Agents are also required to report the receipt or electronic transfer of cash over prescribed limits. Professor Delport said the board had made an important input in the drafting of the legislation and was now preparing a manual which would provide the industry with best practice guidelines.

"The first draft of the bill never would have worked. It required estates agents to establish and verify a client's identity even before they accepted a mandate, which would have been disastrous," Delport said. "We could not allow the Treasury to destroy the multi-billion rand estate agency industry in South Africa." He said the government had made an important concession when it stipulated that these details had to be provided within seven days of a deal being closed, although Delport advised agents to get as much of this information as possible when doing the listing. "Other countries have similar legislation, although in England the law applies only to financial institutions."

He said in terms of the act, "client" meant the seller or landlord in most cases. The agent had therefore no duty to establish the identity of the buyer or tenant. He suggested it might have made more sense to identify the buyer, as this theoretically could be someone trying to launder money. He said agents should go ahead with a deal and conclude it even if a seller refused to comply with these requirements. Agents should then "cover themselves" by placing it on record that they had asked the seller to provide their full names, date of birth, identity number and residential address. He said the seller's tax number, exempted from the requirements, would probably be included in future.

The case of a seller living out of town or overseas presented greater difficulties. The act says "reasonable steps" must be made by the agent to verify the seller's identity. For details call the Estate Agency Affairs Board on 011 880 9994.