In real estate, instinct often plays a bigger role than people realise. Sometimes a transaction looks perfectly ordinary on paper, but something about it feels off. A buyer is unusually evasive, a seller seems reluctant to provide supporting documents, or the source of funds doesn’t quite add up. Experienced property practitioners know that these subtle warning signs should never be ignored.
Under South Africa’s Financial Intelligence Centre Act (FICA), real estate agencies and brokerages are on the front line of the fight against money laundering, fraud, and other financial crimes. But when a commission is on the line and targets need to be met, it can be tempting to overlook warning signs in the rush to close a deal.
Practitioners under pressure may ignore their ‘gut feeling’
Despite the South African property market continuing to show resilience, selling a home is taking longer than many practitioners would like. According to the latest FNB Property Barometer, residential properties spend nearly 12 weeks on the market before they sell. Buyers are becoming more selective, pricing strategies are playing an increasingly important role, and the sense of urgency that characterised the earlier stages of the market recovery is beginning to fade.
In this environment, property practitioners are undoubtedly feeling greater pressure to secure every possible sale, particularly against a backdrop of global uncertainty and persistently high energy costs. That pressure can make it easier to rationalise away small warning signs. In fact, in Prop Data’s industry poll, 42% of property practitioners said they have felt pressured to push ahead with a transaction despite noticing a red flag.
According to Trish Parsons, Owner of Living Atlantic and Operations Manager for The Camps Bay Guy, this often starts with buyers who are determined to move quickly.
“Their eagerness can push practitioners to overlook warning signs,” she says. “This is compounded by internal sales targets and competitive market conditions, where delaying a transaction could mean losing it altogether.”
Basie Botha, Principal at Basie Botha Properties in Mbombela (Nelspruit), says the challenge is intensified by the commission-based nature of the industry and the many competing demands practitioners face.
“Property practitioners operate on commission-based income, while agencies face performance targets. At the same time, sellers often become impatient and buyers demand speed, while resisting detailed questioning about their financial affairs.”
Botha adds that the pressure is also amplified when compliant agencies compete against operators who ignore their legal obligations.
“Where enforcement is inconsistent, compliant practitioners are commercially disadvantaged when adherence to section 21 of FICA’s customer due diligence requirements slows transactions.”
FICA compliance in the spotlight
For property practitioners, the challenge is often not a lack of awareness, but the practical complexity of applying FICA requirements in transactions.
As Botha explains, source of funds verification can be particularly challenging. “Applying FICA is far more complex in practice than in theory. Questions about the source of funds raise understandable resistance, as most clients are uncomfortable disclosing sensitive financial details. If a buyer states that funds originate from an insurance payout, inheritance, or savings, a practitioner cannot verify this independently.”
He adds that while FICA sets clear obligations around due diligence and reporting, it is not designed to turn practitioners into investigators: “FICA requires reasonable measures to establish the source of funds under section 21, not a forensic investigation. Suspicious activity must be reported under section 29, but practitioners are not law enforcement officials. Enhanced due diligence for politically exposed persons is required under section 21F, yet accountability for truthful disclosure must rest with the client.”
Where the framework can break down, he notes, is in uneven enforcement and inconsistent standards across the sector. “Regulators and supervisory bodies must ensure enforcement is fair, consistent, and sector-wide.”
While the practical challenges are clear, compliance cannot become secondary to deal-making pressure. “The lesson here is that compliance is non-negotiable,” says Parsons. “Agencies need to strengthen accountability at every level, not treat these steps as tick-box tasks. A deal is not complete until FICA has been submitted, as we see with financial institutions. We have to set the bar and lead by example, because the risks of neglecting due diligence far outweigh the pressure to close quickly.”
Know the FIC warning signs
Compliance starts with knowing what should raise concern. According to the Financial Intelligence Centre’s (FIC) Guidance Note 4B, here’s what to look out for:
- Deposits followed by immediate transfers elsewhere
- Unexplained or unwarranted international transfers
- Transactions that are unusually large or inconsistent with a client’s profile
- Use of complex structures, such as trusts or corporate vehicles, without a clear purpose
- Attempts to conceal the identity of the client or ultimate beneficiary
- Transactions that do not align with normal industry practice
- Multiple or structured transactions that appear designed to avoid reporting thresholds
- High volumes of cash activity that are difficult to explain
- Requests for payments to unrelated third parties
- Insufficient, vague, or suspicious information provided by the client
- Unusual exchange between small and large denomination cash notes
- Involvement of foreign jurisdictions without a clear rationale
- Closing an account after being asked for additional due diligence information