Author: Faith Ngwenya, Technical Executive at the South African Institute of Professional Accountants (SAIPA)
 
The proposed inclusion of professional accountants into a schedule of the Financial Intelligence Centre Act (FICA), making them accountable institutions, will have major repercussions for the accountancy industry.
 
The Financial Intelligence Centre has identified the sector as being “vulnerable” to money laundering and terror financing activities.
 
Accountable institutions
Institutions identified in Schedule 1 to the FICA include lawyers, estate agents and banks and in Schedule 3 include motor vehicle dealers and dealers in Kruger rands.
 
The act requires that accountable institutions register with the Financial Intelligence Centre (FIC), that they disclose the identity of their clients to the centre, train their employees, appoint a compliance officer, draw up a risk register and plans to mitigate the risks, give them additional recordkeeping duties, and oblige them to report to the FIC.
 
SAIPA has raised concerns in terms of the compliance burden that will now go way beyond the existing obligation to report suspicious transactions or activities. The latest proposals will impact on the administrative and financial burden of especially small practices and people running their own businesses.
 
Legislative alignment
The “overly broad” wording of the proposal is upsetting. It also appears to be in conflict with existing legislation such as the Companies Act. In terms of the act a person can register his own company by simply registering with the Companies and Intellectual Properties Commission.
 
SAIPA is not shunning its responsibility as a regulatory body, but it does request much more clarity on some of the wording, to understand the impact of the proposals. Questions which beg answers are whether there will be monetary thresholds or number of employees which may exclude some of the smaller firms from this heavy compliance burden, whether there will be financial or administrative assistance if smaller firms are not excluded, and what exactly defines “assisting” a client.
 
Who will be an accountable institution
According to the FIC any person who carries on a business of preparing for or carrying out transactions for a client concerning the following activities will be considered an accountable institution:
 
* assisting a client in the planning or execution of the buying or selling of immovable property; the buying or selling of a business; the opening or management of a bank, investment or securities account; the organisation of contributions necessary for the creation, operation or management of a company outside South African; the organisation of contributions necessary for the operation or management of a close corporation;  the creation, operation or management of a company or a close corporation; and the creation, operation or management of a trust outside the country.
* representing a client in any financial transaction;
* assisting a client in disposing of, transferring, receiving, retaining, maintaining control of or in any way managing any property; or
* assisting a client in the management of any investment.
 
Money launderers and accountants
According to the FIC professional accountants are “particularly useful” for money launderers when it comes to the seeking of financial and tax advice to reduce their tax liabilities or to place vast amounts of proceeds.
 
They also approach professional accountants to help with the setting up of companies and trusts to hide the proceeds of crime and the perpetrator of crime. They also use property transfers as a cover to move illegal funds and they use accountants to get access to financial institutions.
 
SAIPA believes there are solutions to deal with concerns raised by the FIC, but that the current proposal is a kneejerk reaction to the behaviour of unscrupulous practitioners.
 
However, if the proposal is accepted as it is accountants who are awarded the professional accountant designation by the institute must be aware that they will be considered an accountable institution. They will have to comply with the requirements set out in the FICA schedule.
 
However, SAIPA is of the view that the obligations that will be placed on a professional account is to become a forensic investigator and an auditor – all in one.
The FIC is of the opinion the inclusion of professional accountants will improve its capability for producing “better quality and more substantive financial intelligence reports” for use in solving crime.
 
A concern is whether the FIC will have the capacity to give due regard to all the new sources of information.
 
ENDS
 
MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za  
 
For more information on SAIPA please visit:
Website: www.saipa.co.za
Twitter: @SAIPAcomms
LinkedIn: South African institute of Professional Accountants Company
Facebook: South African Institute of Professional Accountants

Author: Faith Ngwenya, Technical Executive, South African Institute of Professional Accountants (SAIPA)
 
“We need to recreate the traditional risk management process entirely if we are to sufficiently break down silos and become truly fluid,” our Institute’s Western Region Chairman Hashiem Salie once stated.
 
Reflecting on his statement, I believe there are two aspects to risk with which accountants must come to terms. First, with the many developments taking place in the profession, their own survival will depend on their ability to look past accounting as their primary service and create value for their clients as strategic partners.
 
Second, with greater competition, disruption and uncertainty across the market environment, businesses are turning to their internal and external financial officers for answers. In reality, they’re positioned as the best candidates to rewrite the rules of risk management and it therefore behoves them to take up the challenge.

Adding value
The media is awash with articles about how Artificial Intelligence and Robotic Process Automation are taking over basic accounting functions, performing the same tasks with greater efficiency and at a lower cost. By no stretch of the imagination does this news signal the end of the profession, but it does herald in a future where the compilation, checking and formatting of financial data is no longer a key value proposition. Rather, the focus is moving to the practitioner’s interpretation of that information and their ability to transform it into practicable business strategy.
 
The silo accountants must therefore escape the notion that they are isolated to a limited set of activities and responsibilities. By looking beyond the numbers, they will recognise many areas to which their unique talents can be applied. At SAIPA, we believe that risk management and business rescue are two extended services that accountants should already be introducing to their clients. And this is just the start.

Preparing for expanded service
Why are accountants a company’s best strategic partner? Let’s draw a comparison between their thinking and that of production managers. When contemplating the purchase of a new machine, for example, production managers may see a means to rapidly complete their work in progress jobs and so clear their production queue. However, accountants are aware of the bigger picture. Not only do they consider the utility the machine provides but also what that utility means in terms of corporate financial goals, its profitability, maintenance costs, and even how else its funds could be used to realise a better return on investment. This expanded view of matters is what makes the accountant unique among the management functions and it is why they’re seen as business enablers.
 
However, risk management and business rescue both go further than just the finances of the business. It’s therefore imperative that the consulting accountant takes cognisance of risks in the macroeconomic environment, the market environment and the business environment. While many risks can be revealed from an organisation’s financial ratios, they cannot predict the effect of the CEO being unable to attend to their duties for an extended period. In this case, the risk must be thoroughly researched and a sensible succession plan should be developed.
 
This is also true in the case of NOCLAR (Non-compliance with Laws and Regulations), another kind of risk that companies face. A new international Code of Ethics clears the way for accountants to deal decisively with non-compliance with laws and regulations, even allowing them to report unresolved issues to the appropriate authorities without breaching client confidentiality. So, practitioners must address non-compliance even if it occurs outside their direct area of responsibility.

Closer relationships
Proper risk management and business rescue require an intimate knowledge of the inner workings and unique traits of the client’s organisation. An accountant who prepares financials once a year will not be in a position to offer the best guidance. So, they must adjust their mindset and strive to build good rapport with the customer in need of these services.
 
Accountants are indeed in the best qualified function to revise the rules of risk management. They must, however, expand their horizons and look beyond the numbers.
 
ENDS
 
MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za 
 
For more information on SAIPA please visit:
Website: www.saipa.co.za
Twitter: @SAIPAcomms
LinkedIn: South African institute of Professional Accountants Company
Facebook: South African Institute of Professional Accountants

During his 2018 national budget speech on 21 February, former Finance Minister Malusi Gigaba announced that the government would invest R57 billion in free tertiary education. This is to help those from households with a combined income of under R350,000 per annum to study further and secure better futures for themselves.

Support for the plan
While the South African Institute of Professional Accountants (SAIPA) fully supports assistance to enable higher education, measures must be implemented to ensure the country benefits from this substantial investment. This is according to Ettiene Retief, Chairman of the National Tax and South African Revenue Service (SARS) Committee at SAIPA.
 
“Yes, we need to assist those who aspire to be more but find themselves bound to a lower income group,” he states. “However, according to the then Finance Minister, this will be the fastest growing expense line item in our budget year on year, and several shortcomings need to be addressed.” The allocation is expected to see an average annual growth of 13.7%.

No correlation with skills shortage
South Africa suffers from a shortage of specific skills and would do well to direct funding to the degrees that will give it an economic advantage. “We should provide guidance to steer the youth as merely obtaining a degree will not guarantee a job or ensure an economic return on investment,” says Retief. Free degrees should be used as an incentive for young people to follow valued career paths.

No skills retention plan
After completing their studies, graduates are under no obligation to remain in South Africa. “If they use their degree as an entry qualification to another country,” says Retief, “we immediately lose the benefits of free education.” Some professions require a period of practical application, like doctors serving in state hospitals, and Retief suggests that a similar requirement should be made of free degree holders.
 
There is no indication of a limit to the amount of time a student may spend on their degree. According to Retief, study credits may remain valid for up to 10 years. “When a person pays tuition or gets a student loan, there is some urgency in completing the degree, but if funding is unlimited the student can take 10 years to complete a three-year degree”. “Also, how do we ensure that the person will even obtain their degree after spending years at university”. Free degrees should therefore be time restricted.
 
Also, higher-education institutions have limited capacity, and can only accommodate a limited number of students.
Lower appreciationIt’s a well-established fact backed by much research that when people get something for free, their appreciation of its value is much lower than if they had to pay for it themselves, even if they only make a small investment. “While free tertiary education is commendable,” says Retief, “the learner should make some investment themselves. This will give students ownership of their studies and the perseverance to achieve their goals.”
 
Overall, Retief contends that the government should only implement free tertiary education with comprehensive guidelines and limitations. “Rather than announcing an arbitrary figure, they need to provide details on how the plan will be implemented and how it will achieve its aim of developing the skills the country needs.”

ENDS

MEDIA CONTACT: Idéle Prinsloo, 082 573 9219, idele@thatpoint.co.za, www.atthatpoint.co.za 
 
For more information on SAIPA please visit:
Website: www.saipa.co.za
Twitter: @SAIPAcomms
LinkedIn: South African institute of Professional Accountants Company
Facebook: South African Institute of Professional Accountants