The Appeal Board of the Financial Intelligence Centre (FIC) has upheld the effective penalty of R1 065 924 imposed on Gauteng-based Truck World for failing to report transactions exceeding the cash threshold of R24 999.99.
An inspection by the FIC in July 2019 found that Truck World had failed to register timeously with the Centre and had not reported 204 transactions that exceeded the threshold, with a total value of R26 648 127.50.
In February last year, the FIC imposed the following sanctions on Truck World:
- A directive to report the transactions that should have been reported.
- A penalty of R2 664 812 (10% of R26 648 127.50), of which 50% had to be paid over 12 consecutive months at a rate of R111 033 a month starting on 1 April 2021. The balance of the penalty was suspended for three years on condition that Truck World complied with its reporting obligations. However, if Truck Work reported all the unreported transactions, 60% of the penalty (R1 598 887.20) would be suspended and 40% (R1 065 924.80) would be payable over 12 months starting on 1 April 2021.
- A reprimand for failing to register timeously.
- A caution not to repeat the conduct that led to the non-compliance.
None of the unreported transactions involved money laundering or the financing of terrorism.
All the transactions were reported
Truck World, which started operations in 1997, did not dispute that it failed to register with the FIC timeously. It registered on 23 July 2019 after the Centre had issued a notice of inspection on 11 July.
It also did not dispute that it failed to report the 204 transactions.
The grounds on which Truck World lodged its appeal were:
- Its failure to comply with the Financial Intelligence Centre Act (Fica) was a result of ignorance of the law;
- The non-compliance was not negligent;
- A reprimand would be an adequate sanction; and
- The penalty was excessive and unjustified considering that all transactions had been reported since the inspection.
Truck World reported 200 of the unreported transactions between 13 September 2019 (the date of the final inspection report) and 19 February 2021. By 1 March 2021, it had reported all the transactions.
The appeal was heard in September last year, and the board handed down its decision in December.
Reprimand would be ‘a slap on the wrist’
The Appeal Board said ignorance of the law does not excuse non-compliance with Fica, although it may impact upon the degree of blameworthiness and is a factor to be taken into account when determining the appropriate sanction.
It said the Act made it clear that non-compliance does not arise only if a reporting institution fails to register with the Centre or report transactions once it has been called upon to do so.
Turning to the penalty itself, the Appeal Board said a reprimand would “trivialise” Truck World’s non-compliance and the Centre’s authority and would be inconsistent with section 45C(2)(a) of Fica, which sets out the factors that must be taken into account when determining an appropriate penalty.
It said a reprimand would disregard that:
- The non-compliance constituted a crime that endured for eight years. The unreported transactions covered only about half that period (1 January 2015 to 30 July 2019), because the Centre limited its inspection to this period, not because there were no reportable transactions between 2 March 2011 and 31 December 2014.
- Truck World had committed a criminal offence not just once but 204 times.
The board noted that, as a result of the FIC’s offer to suspend 60% of the penalty if Truck World reported the transactions – as it had subsequently done – the effective penalty had been reduced to 4% of the total value of the unreported transactions.
Truck World had also been allowed to pay off the penalty at a rate of R88 270 a month over 12 months.
It said a financial penalty “will send a message that the Centre views non-compliance by reporting institutions in a serious light and that institutions must not expect to get away with a slap on the wrist”.