Property Reporter

IT IS cheaper for estate agents to comply with requirements of the Financial Intelligence Act, aimed at clamping down on money laundering activities, than face a hefty fine and a possible criminal conviction if they do not.

The board is encouraging smaller estate agents who may want to cut corners to avoid the costs and comply with the requirements of the act.

SA's Financial Intelligence Centre website says estate agencies are among 18 establishments required to adhere to strict obligations to fight money laundering, which include customer identification, record-keeping and internal controls.

The National Referral Network, the independent South African real estate network, reports that the global war on money laundering is gathering momentum as the 31 members of the international Financial Action Task Force clamp down on organisations within their countries found to be in contravention of stringent antimoney laundering legislation.

Last December, two UK banks were fined £2m for failing adequately to establish the identity of customers after the implementation of new powers by the Financial Services Authority, on which the South African equivalent, the Financial Intelligence Centre, is closely modelled. The Royal Bank of Scotland and Northern Bank were fined £750000 and £1,25m respectively.

Charles Alterksye, chairman of National Referral Network, warns that the same thing can happen here. Alterksye says estate agents found guilty of contravening laws against money laundering in SA may face jail sentences of up to 15 years or fines of up to R10m.

He says clients should make every effort to accommodate estate agents' requests for information in this regard.

Tarien Hendrikse-Setan, of business advisory firm Ernst & Young, says that based on figures in Finance Minister Trevor Manuel's budget speech of 200001, SA attracts about R60bn to R80bn in laundered money every year. She says that, internationally, figures based on the Walker model show that money laundering involves about $1,7-trillion a year.

Bruce Forrest, of Meumann White Attorneys, says it is imperative that all players ensure that they are in compliance.

"My advice to estate agents is to take it very seriously because a lack of compliance will have grave consequences. The two banks in the UK are good examples of these consequences."

Moshidi says complying with the act is an expensive exercise. "As an estate agent, you'll need not only to have additional staff but also, importantly, a compliance officer," he says.

Moshidi says estate agencies also have to have training models based on the act for staff.

He says there will not be immediate prosecutions in SA. The Financial Intelligence Centre will first have to build up a profile of defaulting firms and individuals. Moshidi says the implementation of the legislation would then be phased in.

Moshidi also suggests that estate agents can outsource the function of complying with the act. He says the extra cost for estate agents is preferable to ending up with a criminal record and a huge fine.

Initially, there were numerous complaints from estate agents about the new laws and how to comply. "We have been holding countrywide legal update seminars, where compliance with the act has been explained to estate agents," Moshidi says.

Pam Golding Property Group CE Andrew Golding says the group has gone to great lengths to ensure it complies with the act in every way.

"Our agents have on specific training courses and are obliged by law to get information from clients," Golding says.

Smaller estate agents need not hire specifically focused compliance officers. "You could be the owner of an agency and the compliance officer," Golding says. He says there is an acceptance that the new laws are meant to fight money laundering and need to be adhered to.

Dirk de Wet, the principal of Griffon Properties, a small estate agency in Hermanus, says it is against money laundering or any type of corruption and support government and the act.

However, he says the smaller estate agents should be taken into consideration and it should be made easier to comply with the laws. "As long as there is not a heap of red tape we have to go through, it's fine," he says.

"The more you burden the small guy with red tape, the more you put him out of business because he cannot get out and do business," says De Wet.

De Wet says the Estate Agency Affairs Board has been assisting people, but that perhaps more thought should go into how to assist small estate agents.

He says lawyers, who handle the transfers, as well as banks should also be called upon to verify information.

Oct 15 2003 08:05:47:000AM Nick Wilson Business Day 1st Edition