With effect from 19 December 2022, schedule 1 to the Financial Intelligence Centre Act, 38 of 2001 (FICA) was amended to include persons who provide credit in the list of accountable institutions in schedule 1 of FICA. Item 11(a) and item 11(b)
list two types of persons who provide credit which are scoped in as accountable institutions. Item 11(a) contemplates a person who carries on the business of a credit provider as defined in the National Credit Act, 34 of 2005 (NCA), and Item 11(b) contemplates a person who carries on the business of providing credit in terms of any credit agreement that is excluded from the application of the NCA by virtue of section 4(1)(a) and (b) of the NCA.
Following these amendments, the Financial Intelligence Centre (FIC) issued the first
draft of Public Compliance Communication (PCC) 23A on 15 December 2022. After a two-year consultation process the FIC has issued updated guidance and published a revised draft PCC 23A on 18 December 2024.
Draft PCC 23A provides guidance on the interpretation of item 11(a) and item 11(b).
First category of credit providers – Item 11(a)
The first category of credit providers entails those who carry on the business of providing credit and are required to be registered with the National Credit Regulator as credit providers under the NCA. Draft PCC 23A lists the various types of credit providers which most notably includes:
- a party who supplies goods or services under a discount transaction, incidental credit agreement (subject to section 5 of FICA) or instalment agreement;
- the party who extends credit under a credit facility; and
- any other person who acquires the rights to a credit provider under a credit agreement after it has been entered.
Importantly, the FIC regards persons who purchases a loan book to fall within the ambit of a credit provider as contemplated under Item 11(a) and will need to be registered as an accountable institution. The FIC views such institutions as replacing existing credit provider under the credit agreement even where such institutions no longer extend any credit. This includes persons who are managing a run-off loan book. Debt collection service providers are not regarded by the FIC as being credit providers for purposes of the first category.
Draft PCC 23A clarifies that the FIC is of the view that where an entity only enters into an incidental credit agreement that entity is not deemed to be an accountable institution under item 11 and is not required to register as an accountable institution.
Second category of credit providers – Item 11(b)
The second category of credit providers are those persons who carry on the business of providing credit in terms of any credit agreement that is excluded from the application of the NCA by virtue of section 4(1)(a) and (b) of the NCA. Draft PCC 23A states that entities who have only entered into an incidental credit agreements are not considered to be carrying on the business of a credit provider. The exclusions in the NCA are for a credit agreement where the consumer is:
- the state;
- an organ of state;
- a juristic person whose asset value or annual turnover is over ZAR1 million per annum; or
- a juristic person whose asset value or annual turnover is less than ZAR1 million per annum and the principal loan amount is over ZAR 250 000.
Draft PCC 23A notes that the second category is wide, the FIC is of the view that all credit agreements between legal persons falls within the ambit of item 11(b) of Schedule 1, regardless of whether the credit agreement is not specifically excluded from the application of the NCA. The onus is on the entity to evidence that they do not fall within this category, where such assertions are made. Draft PCC 23A explains that when item 11(b) is read with section 4(1)(a) and (b) as well as section 9(4) of the NCA, the definition of credit agreement for purposes of the second category includes where:
- The agreement is at arm's-length
- The credit provider's clients are juristic persons regardless of the asset value or annual turnover
- The credit agreements are large agreements (exceeding ZAR 250 000), where the client is a juristic person.
- The credit provider is registered or operational in South Africa; and
- The creditor is the state or an organ of state.
Concluding remarks and comment period
The remainder of draft PCC 23A sets out the interpretation of single transaction or a business relationship in the context of credit providers. Specifically, that the FIC's interpretation is that credit agreements are considered business relationships rather than single transactions under FICA. Draft PCC 23A also discusses possible anti-money laundering, counter terrorist financing and counter proliferation financing risk indicators.
A copy of the revised draft PCC23A can be accessed
here. Written comments on the second draft PCC 23A should be submitted
via the online comments submission link only. Any questions or requests relating to the draft PCC 23A may be sent to the FIC only at
consult@fic.gov.za. The deadline for submissions is before close of business on
Friday, 07 February 2025.
