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The Institute of Estate Agents of South Africa
(Incorporated association not for gain: reg no 1969/000012/08) /
National
10 Howard Studios, Sheldon Way, Pinelands 7405 • Tel 021 531 2074 • Fax 086 511 4624
E-mail: • Website:

30 April 2008

Per e mail:

The Secretary to Parliament

c/o Mr Bradley Viljoen

Committee Section

Parliament of the RSA

Dear Sir,

Comments on the FIC Amendment Bill, 2008, as per notice 403 of 2008, Government Gazette, 4 April 2008.

The Institute of Estate Agents of South Africa (IEASA) is the voluntary professional body for estate agents, as established in 1937.

We would like to officially comment on the proposed Bill, as invited in the above publication.

IEASA is a member of the International Consortium of Real Estate Associations (ICREA), which is the only representative real estate group on the Financial Action Task Force (FATF), an inter-governmental body whose purpose is the development and promotion of national and international policies to combat money laundering and terrorist financing. The concern of ICREA is that the obligations placed on real estate practitioners internationally regarding money laundering are becoming more and more onerous, and are potentially impacting business and financial operations significantly, and therefore the success of a firm. ICREA has participated in a process of drafting a “Guidance for the real estate broker assisted transaction sector” for the FATF, which is still in draft form. We hoped to be able to present you with a final copy by the deadline for comments on the Bill, but learnt last night at a telecon of the Exco of ICREA that it is not ready yet. I include the draft document in the mean time as a separate attachment for your consideration.

The estate agency industry in South Africa is structurally comprised of a majority of SMME businesses, and the obligations currently put on them by the FIC are already felt as more onerous than it could be, according to feedback from our members.

In general we would like to comment as follows, and would gladly give more detailed input if required.

Having read through the draft, we found many proposals that would affect the estate agency directly (and perhaps even the IEASA as a voluntary industry association) if passed:

  • FICA to override all other laws which may conflict with it, except for the Constitution;
  • duties of supervisory bodies (which include the Estate Agency Affairs Board(EAAB)) to be tightened up, and if a supervisory body can't meet its obligations, the FIC can do the job for it; supervising its industry would be a supervisory body's "core function"in addition to its existing functions. Given EAAB's general lack of capacity, that might mean that FIC ends up directly supervising the EA industry;
  • FIC or supervisory bodies may issue directives through the Government Gazette.Failure to comply could mean a multi-million rand fine;
  • "accountable institutions" (which include estate agencies) would have to register with FICA, and notify any later changes of address etc.Failure to register or to notify changes could mean a multi-million rand fine;
  • an agency's FICA compliance and its "continued availability of human, financial, technical and other resources" to ensure FICA compliance would become factors to be considered in whether or not to issue a Fidelity Fund Certificate (FFC) to an agent.This suggests setting minimum criteria for compliance resources;
  • EAAB could refuse an FFC to someone who, directly or indirectly, has not complied with FICA or has been involved in money-laundering or any terrorist-related activity (see sec 13);
  • FIC and supervisory bodies to set up inspectorates to inspect accountable institutions routinely andat other times when necessary.An inspection may include questioning people, asking for documents to be produced, opening safes and strong rooms, extracting data from computers, seizing documents.Any expense incurred in an inspection to be borne by the institution being inspected;
  • FIC or a supervisory body could impose "administrative sanctions" (i.e. a caution, a reprimand,remedial action, restriction or suspension of business activities, a multi-million rand fine) for non-compliance with FICA or failure to comply with licence conditions, or failure to comply with a gazetted directive.There's a suggestion (sec 45C(2)(d)) that "a voluntary association of which the institution or person is a member" might be involved, an institution could however appeal against a sanction.

Our appeal to you is to take into account, when reviewing the Bill, that many of the existing, and proposed, obligations could be fairly easily met by larger businesses and corporations, but not by SMME’s, as found in the majority of the estate agency industry, and some measure of relief should be granted to them.

Although we subscribe to the general principles of the FIC, it is clear from the FIC’s own admission that there is very little evidence yet since the inception of FICA that the estate agency industry is a target for money laundering in RSA, which few occurrences could easily be dealt with by the inclusion of Attorneys and Accountants as the accountable institutions, taking into account the registration process of property in RSA.

We believe that serious consideration should be given to greatly simplify estate agents involvement with the FIC, in line with international best practises.

Yours truly,

Dr W T Marais

President: IEASA

Attachment: Draft Guidance for the Real Estate Broker Assisted Transaction Sector.