Keeping abreast of regulatory changes

Motus operates within a highly regulated environment. Our ability to quickly identify where our operations are impacted and timeously implement the required controls, enables us to maintain trusted relationships with our stakeholders.

Over the next year, we expect our regulatory environment to intensify. Given our long-standing commitment to offering the right products at the right price in the right way, we are positive about the upcoming changes that we believe will enhance consumer safety, transparency and disclosure, ultimately providing us with a competitive advantage.

  • A shifting regulatory environment which inherently creates uncertainty and cost pressures.
  • Balancing the time and resources required to manage compliance with regulations against those needed to focus on strategic initiatives and agile operations.

What we are doing

Industry memberships and regulatory consultation

Our memberships in industry bodies are critical to understanding the impacts of changing automotive regulations on the Group and our industry, and how we need to change our processes to comply. We support regulatory change that improves our transparency and trust with our customers, and ensures a competitive yet collaborative automotive industry. We actively participate in regulatory consultation processes, either directly or through our memberships, and in a number of industry forums to contribute to the shaping of upcoming automotive policy. Where uncertainties remain, we work with industry bodies to explore possible solutions.

Employee training

Our employees receive training to help them keep abreast of emerging industry trends and upcoming regulatory changes. Training programmes are delivered face to face and online.

Recent regulatory changes

General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act

The Omnibus Amendments seek to address deficiencies identified in the Financial Action Task Force Mutual Evaluation Report relating to customer due diligence measures contained in FICA, and improve South Africa's legal and institutional framework to strengthen the implementation of measures to combat money laundering, terrorism financing and proliferation financing. The amendments extend the powers of the FIC to access information on any database held by any organ of state. The Act also amends several laws to provide for an effective definition, alignment and monitoring of beneficial ownership.

Automotive Aftermarket Guidelines

The Automotive Aftermarket Guidelines aim to increase the inclusivity of previously disadvantaged individuals and small and medium enterprises in the automotive value chain; create more transparency around value added products and the servicing, maintenance and repair of vehicles, especially when sold with the vehicle; and increase consumer awareness and choice. The guidelines have a strong transformation focus and are designed to remove perceived high barriers to entry into the automotive industry. They require OEM arrangements to be inclusive, dealership appointments to be transparent, that OEMs increase independent service provider (ISPs) access to their technical information, technical training and parts, and that insurers promote fair allocation of work to their suppliers.

Since its effective date in July 2021, very few customers have requested that service and maintenance plans be unbundled from vehicles. This is attributed to our vast expertise and competitive rates in the servicing of vehicles and procuring of OEM parts through dealerships.

We approve warranty claims where the services have been undertaken by an ISP provided the standard meets OEM requirements. While the Competition Commission's recommendations are only guidelines, we have adapted our systems to facilitate our compliance, amended all franchise agreements, point-of-sale and trade documentation as well as service, maintenance and warranty booklets, updated our communication with customers and trained our employees who are involved in the purchase process. Our current procurement processes will be enhanced by Mobility Solutions' E-Procure system.

Administrative Adjudication of Road Traffic Offences Act

The Administrative Adjudication of Road Traffic Offences (AARTO) Act aims to improve driver behaviour, encourage motorists to be law-abiding and reduce road accidents. This will be achieved by creating a system of enforcement, the introduction of a demerit system for offences, significantly higher fines and a new tribunal to deal with motorist disputes.

AARTO will be rolled out in phases. The first phase, started in July 2021, entails establishing AARTO service outlets, enabling eNATIS - the national traffic information system – to collect AARTO payments, and delivering AARTO education to motorists.

While we support the Act and hope that it promotes safe road behaviour, especially among transport operators, it does have serious implications for corporate fleets and leasing and rental businesses as it does not adequately cater for non-South African licence holders, thereby penalising businesses and creating additional administration and operational barriers and costs. Interfacing with the government's IT systems also remains a concern.

Through our membership in SAVRALA1 and NADA, we are engaging with the Road Traffic Management Corporation (RTMC) on developing the IT capability to transfer live data such as demerits, fines and vehicle registrations, which is needed to make AARTO and the road traffic legislation operationally viable.

In January 2022, the High Court in Pretoria ruled in favour of the Organisation Undoing Tax Abuse (OUTA) in declaring the AARTO Act and its amendments unconstitutional and invalid. The Department of Transport is expected to appeal the decision. In the meantime, the AARTO Act and its amendments continue to be operational.

Cybercrime Act

On 1 December 2021, several elements of the Cybercrimes Act came into effect. The law has codified cybercrimes in South Africa and provides the South African Police Service with powers of search, seizure and arrest. The National Prosecuting Authority has the power to prosecute offences.

National Environmental Management: Waste Act, 2008

The Department of Environmental Affairs has published several regulations around waste management, the latest being the expansion of the definition of a producer of waste products to include a wider scope of businesses (including producers of batteries, automotive lighting and single-use packaging). Our vehicle and parts importer businesses now fall under the ambit of this definition which became effective in the latter half of the 2021 calendar year, having cost implications for Motus.

Deferred Sales Model

In October 2021, the Deferred Sales Model (DSM) took effect in Australia, covering all insurance-related value-added products. This differs to the UK DSM, which only covers gap insurance. In both markets, the DSM restricts dealerships from offering certain insurance products for four days at various points in the sales process.

How we measure our performance

Compliance monitoring covers the operationalisation of regulatory requirements in business processes, and the scanning of the regulatory horizon to identify upcoming changes that may impact the Group. Internal assurance providers at business segment level conduct regular audits to measure compliance.

In South Africa, the outcomes of our compliance audits are measured against set benchmarks, including regulatory, product and customer engagement skills.

Governance of ethics and compliance.

Upcoming legislation

Amended Financial Intelligence Centre Act and other FIC regulations

Changes to FICA will shift dealerships from reporting institutions to accountable institutions2 alongside banks and our FSPs to strengthen anti-money laundering controls. The amendments are with the Parliament's Standing Committee on Finance. Transitioning dealerships to accountable institutions will be the largest change to our business landscape in several years; however, it will enhance oversight of every dealership transaction, whether vehicle- or financial services-related.

The FIC also published the following:

  • Directive 6 requiring accountable institutions to screen prospective and current employees for competence and integrity, and against the targeted financial sanctions lists to identify, assess, monitor, mitigate and manage the risk of money laundering, terrorist financing and proliferation financing.
  • Draft Public Compliance Communication 22A, which seeks to harmonise the Protection of Personal Information Act (POPIA) and 'Know Your Client' requirements.
  • Public Compliance Communication 53 with the new requirements for risk management compliance programmes, effective 1 September 2022.
  • Draft Public Compliance Communication 115, to be finalised in September 2022, which provides guidance on the compliance measures to combat proliferation financing.
1 SAVRALA (the Southern African Vehicle Rental and Leasing Association) is an independent industry body that sets acceptable industry norms for rental vehicles.
2 All retailers who offer goods valued at over R100 000 are deemed accountable institutions.

Case study

We have introduced a digital identity tool that aids compliance with FICA and Know Your Customer requirements, and helps F&I managers meet the requirements of our banking partners. The tool onboards all customers (natural and juristic, single or fleet, cash or financed) and is used by FAIMS, Auto Pedigree, LiquidCapital, MotorHappy and Car Rental. It has also been deployed to the Motus Digital Dealer application ( see Delivering innovative products and services), where it has been in operation for over 12 months, providing a full FICA customer onboarding and screening solution that can be completed in the dealership or by customers online.

The tool provides a high level of confidence that digital identities claimed by new customers correspond to real-world identities, and assists to identify the proceeds of unlawful activities, and combat money laundering and the financing of terrorist activities and proliferation. This is a key initiative that helps our dealerships meet their due diligence obligations as accountable institutions when facilitating F&I transactions.

Within FAIMS, the innovative, time-saving and customer centric technology integrates into our existing platforms and workflows, delivering efficiencies and cost savings and reducing risk. For individuals, the solution performs a Home Affairs identity check and validation, sanction screening (across 39 international databases) and a South African fraud prevention check, among others. For juristic persons, a Companies and Intellectual Property Commission check for the business is also undertaken, supporting a seamless company onboarding experience. Since inception in July 2022, over 700 company onboardings have taken place on the system.

The system enjoys the most secure and trusted industry standard protocols, operating from the most secure cloud environment available today. In addition, customer details are conveniently on-hand in the event of a query from an Ombudsman, a legal matter or for auditing purposes.

In a business where 265 F&I agents see more than 20 000 customers a month, and which sells over 9 500 vehicles a month and over 240 000 policies a year, going paperless can equate to enormous savings in printing, managing, storing and accessing F&I documentation.

The solution has been successfully rolled out to all FAIMS representatives, with utilisation on active transactions being around 90% .

Biometric and
digital identity
proofing

Dealer introductory commission

The FSCA has engaged with the automotive industry to better understand the payment of dealer introductory commissions (DIC) in South Africa, and to in turn, ensure that customers are treated fairly.

The Banking Association South Africa (BASA) has assisted the FSCA to develop a framework for a request for information (RFI) on how the sector operates, including industry practices and processes. This has been undertaken in a collaborative process, including members of BASA and NADA, among others. The final RFI has been published for all FSPs operating in the automotive industry, with voluntary participation for non-FSP entities. Submissions were due on 31 July 2022.

Cell Captive Conduct Standard

The final draft of the Cell Captive Conduct Standard regulates the structure of cell arrangements. In preparation, we have explored the various scenarios that could impact our businesses, so that we are ready to respond quickly and decisively. Parliament's Standing Committee on Finance has reviewed the Standard and the FSCA has made updates to it. The FSCA's three-year regulatory plan notes that the implementation of the Standard will be in January 2023.

Conduct of Financial Institutions Bill

The Conduct of Financial Institutions (COFI) Bill is part of the Twin Peaks model of regulation and aims to strengthen the regulation of the financial sector in relation to customer treatment and general market conduct. The COFI Bill requires financial institutions to be re-licensed and their activities will be regulated as opposed to their products. We are reviewing, amending and formalising our internal processes and procedures, where required. The FSCA's three-year regulatory plan does not include an effective date for the Bill.

Consumer Duty

In the 2023 calendar year, the FCA in the UK will introduce the new Consumer Duty, where an organisation's board or equivalent will be held responsible for assessing whether the organisation is delivering good customer outcomes. To provide this assurance, organisations will need to define their boards' level of oversight in terms of this matter. The FCA intends that responsibility for compliance with the Consumer Duty should permeate throughout senior management and the design, distribution and delivery aspects of a product's lifecycle. The aim is to ensure good consumer outcomes are delivered in all business activities and supported by robust evidence.

2022 performance and key objectives

South Africa

  • We developed a database to consolidate and track incidents and action items stemming from internal control matters, compliance audits, internal audit and external audits.
  • Management is closely monitoring our progress to ready the Group's businesses for the AARTO Act.
  • A FICA working group has been established to ready our dealerships to meet their responsibilities as accountable institutions and the stricter compliance regime that they will fall under. We are developing an appropriate compliance framework to be embedded across the dealership network. Training for all frontline employees on FIC reporting and dealership obligations as accountable institutions has been developed and will be rolled out towards early October 2022. Our updated Risk Management and Compliance Programme is being finalised and audit processes are being designed.
  • To align with AARTO requirements, we updated our HR policies to cater for employees who either drive company vehicles or who are required to use their vehicle as a key part of their work.
  • Deemed to be producers of waste, seven of our businesses successfully registered with the Department of Environmental Affairs' Waste Information Centre. Our next steps will be determined once we have engaged with the centre.
  • We subscribed to the Parliamentary Monitoring Group platform, which gives us access to various committee reports and upcoming regulatory changes, and to LegalBrief for daily legal updates on salient matters affecting South Africa.

Regions

  • We have rolled out a compliance self-assessment process in the UK to be completed twice a year. The process will identify compliance gaps, agree action plans to close gaps, and provide compliance assurance.

Objectives

  • Group: promote compliance as a key enabler for the Group to align with global views on consumer protection.
  • Group: continue to participate in the regulatory consultation processes that precede the enactment of regulations, directly and through our membership of several industry forums.
  • South Africa: deliver training on the Cybercrime Act.
  • South Africa: FAIMS will deploy world-leading document validation support for scanned documents, as well as other functionality such as onboarding foreign customers, client declarations, and bank account and email validation.
  • South Africa: adapt the digital identity tool to meet the upcoming FICA requirement to report political connections.
  • South Africa: continue to develop non-paper based value-added products and services (VAPS), leveraging our customer and vehicle data to enhance customer value and mitigate against the increasing regulation associated with paper-based VAPS sold at point of sale.
  • South Africa: continue to enhance our customer relationship management capabilities, ensuring that how we engage and communicate with our customers meets the requirements of various changes in regulations.