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Motor Dealers – Fines for not reporting cash transactions

The Financial Intelligence Centre Act (FIC Act) provides for the obligation to report cash transactions above a prescribed threshold in terms of section 28 of the FIC Act. This means that all cash transactions exceeding R24 999.99 must be reported to the Centre.

Motor vehicle dealers (MVD) are currently classified as reporting institutions under Schedule 3 of the FIC Act and therefore they are obliged to register with and file certain regulatory reports with the Financial Intelligence Centre (FIC). One of these is the reporting of cash transactions that exceed the threshold mentioned above. Failure to do so can (and have) lead to heavy sanctions on dealerships.

In a recent example, a motor dealer received cash deposits for R140 000 and R39 000 respectively, but did not report it to the Centre within the prescribed period. The dealer’s excuse was that these transactions were in respect of a lay-bye deal. When this oversight was pointed out by their compliance officer, they did so within two days. In response, the FSCA issued an Administrative Sanction Notice based on the non-compliance and serious violation of the provisions of the Act. Although the dealer co-operated with the FSCA, the regulator was of the view that the dealer’s argument that its only transgression was one of late reporting, was not sufficient to justify the FSCA not imposing an administrative sanction.

As a result and in terms of section 45C(1), read with section 45C(3)(e) of the FIC Act, the FSCA imposed a financial penalty on the dealer of R17 980 for non-compliance with section 28(b) read with regulation 24(4) of the Regulations.

Other case studies have shown sanctions that take the form of fines ranging from R66 000 for 6 matters that were not reported to R 368 000 for 50 matters that were not reported.

If you have any uncertainty in this regard, please speak to your compliance officer.

The proposed amendments to the FIC Act are proposing to change MVDs from being reporting institutions to accountable institutions. Read Amendments to FICA – Proposals will affect FSPs and motor dealers.

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