The 2023/24 Integrated Report of the Financial Sector Conduct Authority ("FSCA") notes that the FSCA has set a new record with penalties during the year under review totalling over R943 million on 31 persons. This is a significant increase from the previous year's R100 million, which were imposed on 44 persons.
During this period, South Africa's financial-sector watchdog registered 483 new investigation cases and finalised 418. Further, it suspended the licences of 1 061 financial service providers ("FSPs"), withdrew 75 FSP licences, and debarred 156 individuals.
This aggressive enforcement drive aims to combat financial misconduct and to support efforts to exit the Financial Action Task Force's grey list.
On 28 February 2024, the FSCA stated in a media release that it had imposed an administrative sanction of R16 million on Ashburton Fund Managers ("AFM") for failing to comply with certain provisions of the Financial Intelligence Centre Act 38 of 2001 ("FICA"). One such failure involved the fact that, although AFM did develop a risk management and compliance programme ("RMCP") as required under FICA, the RMCP was found to be defective as it failed to set out the manner in which it would comply with FICA, including those relating to the implementation of an RMCP. Recognising the remedial action already taken to date by AFM, the FSCA agreed to suspend R6 million of the total imposed penalty for a period of three years, on condition that AFM fully complies with a directive to remediate the remaining deficiencies.
On 5 June 2024, following an inspection conducted by the FSCA on 30 August 2022, the FSCA announced that a financial sanction of R1.1 million had been imposed on Mika Finansiele Dienste ("Mika") for (among other things) non-compliance with the requirement to implement a proper RMCP. The FSCA, however, acknowledged Mika's commitment to addressing these shortcomings and noted its proactive steps to rectify the identified non-compliance issues.
In addition to the FSCA, the Prudential Authority of the South African Reserve Bank ("PA") has also actively been conducting inspections, and issuing sanctions.
Following a FICA inspection conducted in 2020, the PA at the end of September 2024, imposed financial sanctions totaling nearly R16 million, of which R5.9 million was conditionally suspended for a period of 36 months, on Old Mutual Life Assurance for FICA compliance failures, including failure to adequately develop and implement and RMCP.
It is clear that accountable institutions under FICA, including FSPs, banks, certain insurers and credit providers, crypto asset service providers and dealers in high value goods, must ensure that they not only develop proper, RMCPs, but also effectively implement them to ensure FICA compliance.
ENS has developed a FICA toolkit (including an RMCP template and online training) to help fast track compliance, for more information about this, get in touch below:
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