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Although National Treasury is hopeful that South Africa may be removed from the greylist by June next year, there is still much to be done. One of the outstanding items is ensuring the effective implementation of targeted financial sanctions.
Read more: Treasury cautiously optimistic that SA will brave ‘tough challenge’ to get off FATF greylist
In the most recent action, the Prudential Authority (PA) slapped Sasfin Bank with a R160-million net fine for “historic noncompliance” with certain provisions of the Financial Intelligence Centre Act. The Prudential Authority has stressed that “the administrative sanctions were not imposed because Sasfin Bank was found to have facilitated transactions involving money laundering or the financing of terrorism”.
In a statement to shareholders this week, the bank said the fines related to allegations of historic noncompliance within Sasfin Bank’s discontinued foreign exchange business. “Sasfin has and continues to work proactively and transparently with the relevant authorities and regulators,” the statement said, adding that Sasfin had taken legal advice and was considering further representations which could result in a review or appeal of the sanctions in terms of the provisions of the relevant regulations.
Sasfin was last hit with a R500,000 penalty by the Prudential Authority in 2019 and also given a directive to take remedial action for failure to provide adequate training to certain employees.
Two other companies fined this month
Earlier this month, the South African Reserve Bank (SARB) imposed administrative sanctions on two financial services companies in one day (2 August).
Monarch Insurance was fined for noncompliance with the provisions of the FIC Act, following a 2022 inspection. The penalty was R1-million, with R200,000 conditionally suspended for three years as from 10 June 2024.
The noncompliance by Monarch included failing to register with the Financial Intelligence Centre (FIC) as an accountable institution.
The penalty was split into two fines of R500,000 each. The first was for failing to comply with its training obligations, in that it failed to provide ongoing anti-money laundering and combating the financing of terrorism (AML/CFT) compliance training to its employees. The PA imposed a caution not to repeat the conduct which led to the noncompliance, and a financial penalty of R500,000, with R100,000 conditionally suspended for three years.
The second fine was for failure to adequately develop and implement its risk management and compliance programme (RMCP), including to:
- Develop, document, maintain and implement an RMCP;
- Identify, assess, monitor, mitigate and manage its money laundering and terrorist financing risks; and
- Approve its RMCP.
The PA has confirmed that Monarch cooperated and has undertaken the necessary remedial action to address the identified compliance deficiencies and control weaknesses. In this case too, the PA has stressed that Monarch was not involved in nor did it facilitate any transactions relating to money laundering or the financing of terrorism.
On the same day (2 August) the SARB imposed administrative sanctions on Assupol Life for noncompliance with the FIC Act, following an inspection in 2020. Assupol was issued with three cautions, a reprimand and a total financial penalty of R4-million.
The life assurer was fined for:
- Failing to comply with its customer due diligence (CDD) obligations, in that it failed to conduct CDD on sampled active customer relationships, including its high risk-rated customers. The PA imposed a caution not to repeat the conduct, and a financial penalty of R1.5-million;
- Failing to comply with record-keeping obligations, in that it failed to keep records of the sampled client files. The PA imposed a caution not to repeat the conduct which led to the noncompliance, and a reprimand;
- Failing to adequately develop and implement its RMCP. This included adequately developing, documenting and/or implementing processes and procedures for the identification of beneficial owners of legal persons, trusts and partnerships; adequately developing, documenting and/or implementing processes and procedures to sanction screen all its clients at onboarding; adequately developing, documenting and/or implementing processes and procedures to determine if a prospective client is a domestic prominent influential person (DPIP), including family members and known close associates; adequately developing, documenting and/or implementing processes and procedures to provide for the manner in which and place at which its records are kept; adequately developing, documenting and/or implementing a risk rating framework; and vii. adequately developing, documenting and/or implementing its RMCP by not enabling the risk rating categorisation of clients as low risk. The PA imposed a caution not to repeat the conduct which led to the noncompliance, and a financial penalty of R2.5-million.
Ashburton fined in February
Ashburton, a wholly owned subsidiary of the FirstRand group that had about R140-billion in assets under management in January this year, was hit with a R16-million fine by the Financial Sector Conduct Authority (FSCA) in February this year.
Read more: Ashburton Fund Managers slapped with R16m fine by conduct authority for compliance failures
The firm was found to be in breach of the FIC Act by failing to identify and verify the identity of some clients, including beneficial owners of clients.
Although Ashburton did develop a risk management and compliance programme, this did not set out how it would comply with the FIC Act when it comes to:
- Examining complex or unusually large transactions and unusual patterns of transactions;
- Performing customer due diligence when, during the course of a business relationship, Ashburton suspects that a transaction of activity is suspicious or unusual;
- Terminating existing business relationships;
- Enabling Ashburton to determine when a transaction or activity is reportable to the FIC; and
- Implementation of the risk management and compliance programme.
At the time of the inspection, Ashburton also failed to screen its clients, including beneficial owners, against the Targeted Financial Sanctions lists.
In a response to Daily Maverick’s queries, Ashburton said it has already started a remediation programme to address these shortcomings, and the first key milestones have been met.
“This programme includes enhancements to Ashburton’s financial crime policies and frameworks, as well as improvements to its client due diligence and screening processes,” it notes, adding that the FSCA did not find any evidence that Ashburton facilitated any transactions involving terrorist financing or money laundering.
“Ashburton’s clients’ funds and investments are not affected by this in any way. We fully support the FIC Act and believe that a robust regulatory environment is crucial to protect our industry, considering South Africa’s greylisting,” says Duzi Ndlovu, chief executive of Ashburton Investments.
“Proper customer due diligence and screening of clients is also crucial to help identify and mitigate against suspicious and criminal elements from infiltrating the financial system. This makes it especially important for institutions that operate as part of large financial services groups to demonstrate an elevated level of vigilance when managing their financial crime risks,” the FSCA said. DM
