By Suren Naidoo.
The Prudential Authority of South African Reserve Bank (Sarb) has fined HSBC Bank Plc and Bidvest Bank for non-compliance with provisions of the Financial Intelligence Centre Act (FIC Act), as it gets tougher on big banks in a push to get SA off the Financial Action Task Force’s grey list.
Sarb announced imposing administrative sanctions on both banks late on Friday afternoon, just a week after also fining insurer Old Mutual for non-compliance transgressions.
“The Sarb has imposed administrative sanctions on HSBC Bank Plc – Johannesburg Branch [HSBC] as a result of its non-compliance with the provisions of the FIC Act 38 of 2001, following a FIC Act inspection conducted in 2021,” the central bank noted in a statement.
“The administrative sanctions imposed on HSBC are due to its failure to comply with certain provisions of the FIC Act and consist of three cautions and a financial penalty totalling R9.5 million, of which R4 million is conditionally suspended for a period of 36 months as from 10 June 2024, “it added.
Not so coincidently, HSBC announced its planned exit from South Africa last week.
The UK bank said it would sell its corporate branch unit to FirstRand as part of its ongoing strategy to dispose of non-core assets. HSBC did not disclose the financial terms, according to Bloomberg.
‘The Prudential Authority, operating within the administration of the Sarb, is mandated to supervise and enforce compliance by accountable institutions with the provisions of the FIC Act or any order, determination or directive made in terms thereof,” it noted.
The Prudential Authority confirmed that HSBC had cooperated “and has undertaken the necessary remedial action to address the identified compliance deficiencies and control weaknesses”.
The administrative sanctions imposed on HSBC stem from the following:
- HSBC failed to comply with its customer due diligence (CDD) obligations in terms of sections 21(1) and/or 21A to 21H of the FIC Act in that it failed to adequately conduct CDD on sampled active customer relationships.
The non-compliance included deficiencies in the identification and verification of the beneficial owners of clients.
The Prudential Authority imposed a caution not to repeat the conduct which led to the non-compliance and a financial penalty of R5 million, of which R2.5 million is conditionally suspended for a period of 36 months.
- HSBC failed to comply with FIC Act Directive 5 of 2019 in that it failed to attend to automated transaction monitoring system alerts within the required 48-hour period.
The Prudential Authority imposed a caution not to repeat the conduct which led to the non-compliance and a financial penalty of R1.5 million.
- HSBC failed to comply with section 42 of the FIC Act in that it failed to adequately develop, document and/or implement its Risk Management and Compliance Programme (RMCP) that would effectively enable it to identify and verify beneficial owners of clients.
Bidvest Bank
Bidvest Bank also failed to comply with the provisions of FIC Act 38 of 2001, which was following an FIC Act inspection conducted in 2022.
“The administrative sanctions imposed on Bidvest Bank are due to its failure to comply with a provision of the FIC Act and consist of a caution not to repeat the conduct which led to the non-compliance and a financial penalty of R5 million, of which R2.5 million is conditionally suspended for a period of 12 months as from 23 August 2024,” the Sarb said in a separate statement on Friday.
The administrative sanctions imposed on Bidvest Bank stem from the following:
- Bidvest Bank failed to comply with section 42 of the FIC Act in that it failed to implement its RMCP in relation to the assessed trade-based transactions in respect of a sample of clients assessed.
“The Prudential Authority imposed a caution not to repeat the conduct which led to the non-compliance and a financial penalty of R5 million, of which R2.5 million is conditionally suspended for a period of 12 months,” the Sarb reiterated.