Financial intelligence centre
REPUBLIC OF SOUTH AFRICA
PUBLIC COMPLIANCE COMMUNICATION No.10 (PCC 10)
THE CLIENT OF AN ESTATE AGENT
The Financial Intelligence Centre (the Centre) provides the guidance
contained in this Public Compliance Communication (PCC) in terms of its
statutory function in terms of section 4(c) of the Financial Intelligence
Centre Act No. 38 of 2001, as amended (the FIC Act), read together with
Regulation 28 of the Money Laundering and Terrorist Financing Control
Regulations (the Regulations) issued in terms of the FIC Act.
Section 4(c) of the FIC Act empowers the Centre to provide guidance in
relation to a number of matters concerning compliance with the obligations
of the FIC Act.
Guidance provided by the Centre is the only form of guidance formally
recognised in terms of the FIC Act and the Regulations issued under the
FIC Act. Guidance provided by the Centre is authoritive in nature. An
accountable institution must comply with guidance issued by the Centre,
or explain the reasons for non-compliance if prompted by the Centre. It is
important to note that enforcement action may emanate as a result of noncompliance with the FIC Act in areas where there have been noncompliance with the guidance provided by the Centre.
The Financial Intelligence Centre is established in terms of section 2 of the Financial Intelligence Centre Act, Act 38 of 2001
PCC Summary
The client of an estate agent is the person who provides the estate agent
with a mandate and such client has to be identified and verified in terms of
the FIC Act and the relevant Regulations to the FIC Act.
Disclaimer
The publication of a PCC concerning any particular issue, as with other forms of
guidance which the Centre provides, does not relieve the user of the guidance
from the responsibility to exercise their own skill and care in relation to the users’
legal position. The Centre accepts no liability for any loss suffered as a result of
reliance on this publication.
Copyright notice
This PCC is copyright. The material in a PCC may be used and reproduced in
an unaltered form only for personal and non-commercial use within your
organisation.
Apart from any use permitted under the Copyright Act No. 98 of 1978, all other
rights are reserved.
Objective
The objective of this PCC is to provide guidance and clarity to estate agents in
meeting their identification and verification obligations in terms of section 21 of
the FIC Act and the Regulations to the FIC Act when transacting with clients.
1.
Introduction
1.1
The money laundering control measures in terms of the FIC Act impose certain
obligations on accountable institutions, in this instance estate agents. These
obligations are listed in Chapter 3 of the FIC Act and are inter alia:

The duty to identify clients (Part 1);

The duty to keep record (Part 2);

Reporting duties and access to information (Part 3); and

Measures to promote compliance by accountable institutions (Part 4).
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PCC 10 - Client of Estate Agent
2.
Part 1 of Chapter 3 the FIC Act - The duty to identify clients
2.1
Part 1 of Chapter 3 of the FIC Act, and specifically section 21 of the FIC Act
deals with the identification of clients and other persons. Section 21 prohibits
accountable institutions from establishing business relationships or entering
into single transactions with their clients unless they have established and
verified the identities of their clients, or established and verified the identities of
persons representing their clients.
2.2
Chapter 1 of the Regulations, and specifically Regulations 2 to 16, deals with
the establishment and verification of the identity of the different types of clients
and should be read in conjunction with section 21 of the FIC Act.
2.
Transacting with clients
2.1
A transaction as defined in the FIC Act is “a transaction concluded between a
client and an accountable institution in accordance with the type of business
carried on by that institution”. A transaction can therefore be performed either
in the course of a business relationship or as a single transaction.
2.2
The term “client” is not defined in the FIC Act and reference is made to the
Code of Conduct for Estate Agents issued in terms of section 8(b) of the
Estate Agency Affairs Act, Act 112 of 1976.
2.3
Section 1(c) of the Code of Conduct1 defines a client of an estate agent as a
person who has given an estate agent a mandate, provided that should an
estate agent have conflicting mandates in respect of a particular immovable
property, the person whose mandate has first been accepted by the estate
agent is considered the client of the estate agent.
2.4
The Code of Conduct goes further in imposing an ethical duty on estate agents
to not only protect the interests of their clients at all times but also to have due
regard to the interests of all other parties concerned with a particular
transaction.
1
GNR.3415 of 24 December 1992.
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PCC 10 - Client of Estate Agent
2.5
Applying the provisions of the Code of Conduct in the context of the FIC Act,
the duty to identify clients in terms of section 21 of the FIC Act will therefore
apply to buyers, sellers, lessors and lessees where an estate agent is
concerned.
2.6
Section 22(1)(f)(ii) of the FIC Act provides that an accountable institution must,
in the case of a transaction, keep record of the parties to that transaction.
2.7
It is therefore the view of the Centre that record should be kept of all parties to
the transaction. The most practical way of achieving this would be to obtain
the required identification documents for both the buyer and seller, and lessor
and lessee.
3.
Exemption 2- timing of verification of a client’s identity
3.1
Section 21 of FIC Act, as a general rule, prohibits accountable institutions from
establishing a business relationship or concluding a single transaction with a
client before the prescribed steps relating to client identification and verification
have been completed.
3.2
Exemption 2 of the exemptions to the FIC Act made in terms of section 74 of
the FIC Act softens the prohibition by section 21 of FIC Act, by allowing
accountable institutions to accept a mandate from a client to establish a
business relationship or to conclude a single transaction, or take any similar
preparatory steps with a view to transacting with the client, before completing
the verification of the identity of that prospective client.
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PCC 10 - Client of Estate Agent
3.3
This is however subject to the condition that the accountable institution will
have completed all steps which are necessary in order to establish and verify
the identity of that client in accordance with section 21 of the FIC Act before
the institution:

concludes a transaction in the course of the resultant business
relationship, or

3.4
performs any act to give effect to the resultant single transaction.
In practice the exemption allows an estate agent to accept a mandate from a
prospective client, for example to market his/her property with a view to
concluding a sale or lease agreement in respect of the client’s property,
without fully complying with the provisions of section 21 of the FIC Act and the
relevant Regulations applicable to the type of client.
3.5
It is imperative, however, that the estate agent will have completed the
prescribed steps in terms of section 21 of the FIC Act and the relevant
Regulations to establish and verify the identity of the client upon concluding
the sale or lease agreement.
3.6
In instances where there is an open mandate, the provisions of the exemption
can also apply. Multiple agencies that accept the same mandate from a client
may rely on this exemption. However, the estate agency that concludes the
single transaction or establishes a business relationship with the client must
establish and verify the identity of the client in terms of section 21 of the
FIC Act and the relevant Regulations applicable to the type of client.
For any further enquiries regarding this PCC 10, please contact the Centre on
0860 342 342, or by sending an email to: [email protected].
Issued By:
The Director
Financial Intelligence Centre
18 November 2011
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PCC 10 - Client of Estate Agent
Glossary
Section 21 of the FIC Act - Identification of clients and other persons
(1)
An accountable institution may not establish a business relationship or
conclude a single transaction with a client unless the accountable
institution has taken the prescribed steps(a)
to establish and verify the identity of the client;
(b)
if the client is acting on behalf of another person, to establish and
verify(i)
the identity of that other person; and
(ii)
the client's authority to establish the business relationship or to
conclude the single transaction on behalf of that other person;
and
(c)
if another person is acting on behalf of the client, to establish and
verify-
(2)
(i)
the identity of that other person; and
(ii)
that other person's authority to act on behalf of the client.
If an accountable institution had established a business relationship with
a client before this Act took effect, the accountable institution may not
conclude a transaction in the course of that business relationship, unless
the accountable institution has taken the prescribed steps(a)
to establish and verify the identity of the client;
(b)
if another person acted on behalf of the client in establishing the
business relationship, to establish and verify-
(c)
(i)
the identity of that other person; and
(ii)
that other person's authority to act on behalf of the client;
if the client acted on behalf of another person in establishing the
business relationship, to establish and verify(i)
the identity of that other person; and
(ii)
the client's authority to act on behalf of that other person; and
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PCC 10 - Client of Estate Agent
(d)
to trace all accounts at that accountable institution that are involved
in transactions concluded in the course of that business
relationship.
Exemption 2: Timing of verification
2.
Timing of verification.—Every accountable institution may by, way of
exemption from section 21 of the Act, accept a mandate from a prospective
client to establish a business relationship or to conclude a single transaction,
or take any similar preparatory steps with a view to establishing a business
relationship or concluding a single transaction, before the accountable
institution verified the identity of that prospective client in accordance with
section 21 of the Act, subject to the condition that the accountable institution
will have completed all steps which are necessary in order to verify the identity
of that client in accordance with section 21 of the Act before the institution—
(a)
concludes a transaction in the course of the resultant business
relationship, or
(b)
performs any act to give effect to the resultant single transaction.
Extract from GNR 3415 of 24 December 1992 – Code of Conduct
1. Definitions.—
In this code of conduct, unless the context otherwise indicates—
(c)
“client” means a person who has given an estate agent a mandate,
provided that should an estate agent have conflicting mandates in respect of a
particular immovable property, the person whose mandate has first been
accepted by the estate agent, is regarded as the client.
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PCC 10 - Client of Estate Agent