By Lehlohonolo Lehana.
South Africa’s financial sector watchdog, FCSA has imposed administrative sanctions and a R10.6 million fine on Sanlam Collective Investments (SCI) for failing to properly implement anti-money laundering and counter-terrorism controls.
This legislation requires certain institutions to develop, document, maintain and implement a Risk Management and Compliance Programme (RMCP) to identify, assess and mitigate money laundering and terrorist financing risks.
The FSCA said the sanction follows a March 2024 inspection that found SCI’s Risk Management and Compliance Programme (RMCP) was not effectively implemented, particularly in the risk rating of clients.
The programme also failed to adequately address several legal requirements, such as enhanced due diligence on partnerships, the examination of unusually large transactions, and the reporting of suspicious or reportable activities.
Inspectors further found that SCI had not properly identified or verified some clients and beneficial owners, and had not carried out the necessary ongoing or enhanced due diligence on high-risk or politically exposed clients.
In determining the penalty, the FSCA took into account SCI’s previous non-compliance with financial sector laws, including a past enforceable undertaking and a contravention of the Collective Investment Schemes Control Act (Cisca) that resulted in a financial penalty.
Recognising remedial measures already taken, the FSCA agreed to suspend R3.6 million of the fine for two years, provided SCI fully rectifies the breaches and maintains compliance during that period.
The regulator described the violations as “serious”, citing the size and market influence of SCI, and stressed that effective anti-money-laundering controls are critical to protecting the financial system’s integrity.
“Proper due diligence of all clients is crucial to help identify and mitigate against suspicious and criminal elements from infiltrating the financial system. Financial institutions operating within large, international financial services groups are expected to demonstrate a heightened level of vigilance in this regard,” the regulator notes.
The FSCA emphasises that all accountable institutions must strengthen their anti-money-laundering and counter-terrorism financing frameworks, warning that further failures “will result in firm regulatory action”.
SCI notes in a statement that it acknowledges the outcome of the FSCA inspection, which resulted in administrative penalties, but stressed that “no evidence of money laundering, terrorist financing or proliferation financing was identified.”
It adds that it has taken proactive steps to address the findings and is implementing remedial actions to strengthen its compliance framework.
“Clients’ funds and investments are in no way affected. We remain fully committed to protecting your interests and upholding the highest standards of regulatory compliance and operational integrity,” it states.
South Africa’s regulatory bodies, such as the FSCA and the South African Reserve Bank’s Prudential Authority (PA) have in the past few years stepped up enforcement action against institutions that fail to meet anti-money laundering obligations.
The PA has imposed a series of administrative sanctions on several financial institutions – including Standard Bank, Capitec Bank, Old Mutual, Bidvest Bank and HSBC – for shortcomings in their compliance with the FIC Act.
The heightened enforcement action follows South Africa’s greylisting by the Financial Action Task Force (FATF) in February 2023, after deficiencies were identified in anti-money laundering, counter-terrorist financing and counter-proliferation controls.