The company failed to verify clients and their source of funds, among other regulatory breaches. From Moneyweb.
The Financial Sector Conduct Authority (FSCA) has imposed a R1.7 million fine on Harith General Partners for breaches of the Financial Intelligence Centre Act.
Harith is one of Africa’s largest investors in infrastructure with nearly $300 billion (R5.2 trillion) in assets under management and counts the Public Investment Corporation among its major shareholders.
According to the FSCA, Harith failed to conduct the required due diligence on customers, such as verifying their identities, the nature of their business and confirming the source of their funds.
It also failed to scrutinise client information against the United Nations Security Council’s Targeted Financial Sanctions (TFS) list, which is an international register intended to block funds flowing to those involved in terrorism, weapons proliferation and other threats.
Harith did not provide evidence that its client information was cross-checked against the TFS list published under the Constitutional Democracy Against Terrorist and Related Activities Act.
The company was also found wanting in screening employees for competency and integrity.
“An accountable institution is required to screen prospective and current employees for competence and integrity periodically, in a risk-based manner,” says the FSCA.
“Moreover, it must provide for, and record, the manner in which screening for competence and integrity, as well as the manner in which scrutinising of employee information against TFS lists, will be conducted. Harith failed to provide evidence that employees were subject to competence and integrity screening as described above.”
The FSCA says Harith has been cooperating with the regulator in remediating the instances of non-compliance.
Due to the size, complexity and risk involved in the non-compliance, the regulator decided to impose a fine of R1.7 million, of which R500 000 has been conditionally suspended for two years.
This follows an inspection by the FSCA.
“The FSCA considers the identified compliance deficiencies to be serious breaches of the Financial Intelligence Centre (FIC) Act. An effective Risk Management and Compliance Programme (RMCP) is vital not only because it assists accountable institutions to protect and maintain the integrity of their own businesses, but also because it helps contribute to the integrity of the South African financial system as a whole,” says the regulator in a statement.
Although Harith had developed an RMCP, which requires it to determine when a transaction is reportable to the FIC, it was found to be deficient in that it failed to outline how it would comply with the act.
Proper due diligence of clients, as well as screening of client and employees against the TFS lists, is crucial to help identify and mitigate against suspicious and criminal elements from infiltrating the financial system, adds the FSCA.
