The Financial Intelligence Centre (FIC) has finalised Public Compliance Communication 23A (PCC 23A), providing clarity on which credit providers fall within the scope of item 11 of Schedule 1 to the FIC Act – and where the boundaries lie for those operating on the margins.
The guidance follows amendments to Schedule 1 introduced in 2022 and incorporates feedback from two rounds of consultation, including industry concerns around incidental credit and registration obligations.
PCC 23A provides clearer boundaries but also confirms the broad reach of item 11. Entities that extend credit – even outside traditional lending models – will need to assess carefully whether they are, in substance, operating as credit providers and are therefore subject to FICA obligations. At the same time, the guidance addresses areas that previously created uncertainty, particularly around incidental credit and non-bank lending models.
Clarifying who is in scope
At the centre of PCC 23A is the FIC’s interpretation of what it means to “carry on the business” of a credit provider – a concept that determines whether an entity is an accountable institution under item 11.
The FIC emphasises a substance and economic reality assessment, considering factors such as:
- The frequency and regularity of credit activities.
- Whether credit is extended for commercial gain.
- The existence of systems to provide and manage credit.
- Whether the activity is marketed or made available to third parties.
No single factor is decisive; instead, all relevant facts and circumstances are considered holistically.
A wide net – beyond traditional lenders
The guidance confirms that the definition of credit providers extends well beyond banks and registered lenders.
It includes, among others:
- Non-bank financial institutions and fintech lenders.
- Mortgage providers and instalment sale businesses.
- Credit card issuers and finance companies.
- Intragroup lenders and ad hoc commercial credit arrangements.
Even ad hoc or non-traditional credit arrangements may fall within scope where they amount, in substance, to carrying on a credit business.
Incidental credit: clarity, but not a loophole
A key area of industry focus – and the subject of earlier consultation – was the treatment of incidental credit.
PCC 23A confirms that entities that only provide incidental credit, and are not in substance carrying on the business of providing credit, are not regarded as accountable institutions under item 11.
However, where incidental credit arrangements are entered into in a way that results in the regular provision of credit, or are structured to resemble a credit business, the exclusion will not apply. The FIC cautions against attempts to structure around the rules, noting that the substance of the activity will prevail.
Two categories, one outcome
The guidance distinguishes between two categories of credit providers:
- Those operating under the National Credit Act (NCA).
- Those providing credit under agreements excluded from the NCA, particularly where clients are juristic persons.
The second category significantly broadens the scope. Even where the NCA does not apply, entities may still fall within item 11 if they are, in substance, carrying on the business of providing credit.
There is generally no monetary threshold limiting inclusion, reinforcing the wide reach of the provision.
Implications for business structures
PCC 23A also clarifies how the definition applies in more complex scenarios:
- Entities that purchase loan books and assume credit rights are considered credit providers.
- Institutions managing run-off loan books remain within scope where they retain the rights of a credit provider.
- Third-party service providers, such as debt collectors, are excluded where they do not assume the rights and obligations of the credit provider.
The distinction hinges on whether the entity assumes the role of the credit provider in substance.
Credit as a business relationship
The FIC treats credit agreements as ongoing business relationships, rather than single transactions, given their recurring and time-based nature.
This means credit providers must apply full FICA obligations, including:
- Customer due diligence.
- Ongoing monitoring.
- Targeted financial sanctions screening.
- A risk-based compliance programme tailored to their business.
Risk indicators in focus
Beyond scope, PCC 23A sets out detailed indicators of money laundering, terrorist financing and proliferation financing risks relevant to credit providers.
These include:
- Early or irregular loan repayments without a clear source of funds.
- Use of third parties to service loans.
- Credit used for transactions that do not align with a client’s profile.
- Complex ownership structures or foreign-linked entities.
- Credit used to fund crypto asset purchases or unusual cross-border activity.
The FIC notes that credit providers are best placed to identify these risks and must incorporate them into their risk assessments and control frameworks
