Financial Sector Conduct Authority found serious violations of the Financial Intelligence Centre Act. From Moneyweb.
Ashburton Fund Managers, part of FirstRand, said this week that it has launched a programme to correct violations of the Financial Intelligence Centre (FIC) Act that resulted in the Financial Sector Conduct Authority (FSCA) imposing a R16 million administrative penalty.
This comes at a time when financial regulators are tightening the noose on lax compliance that has resulted in SA being grey-listed by the Financial Action Task Force (FATF) – not so much for the absence of anti-money laundering and terrorism financing laws, but compliance with these laws.
Read: Strong anti-money laundering rules, supervision critical to SA’s reputation
The FSCA says it discovered several lapses in the fund manager’s compliance with the FIC Act during its ongoing supervisory activities between October and November 2023.
Though Asburton Fund Managers (AFM) had the requisite risk management and compliance programme (RMCP) for anti-money laundering and counter-terrorist financing, some defects were found regarding:
- Complex or unusually large transactions and unusual patterns of transactions;
- Performing customer due diligence, particularly where suspicious or unusual transactions are involved;
- Implementing its risk management and compliance programme;
- Terminating existing business relationships; and
- Determining when a transaction or activity is reportable to the FIC.
SA has set a target of early 2025 to be removed from the grey list, but has a few stiff hills to climb before then. The Financial Intelligence Centre has eight reporting deadlines to the FATF falling due in May, and the country risks further reputational damage should it miss these.
Read: Lawyers, estate agents could keep SA on grey list
AFM says R10 million of the imposed penalty has already been paid, with the remaining R6 million suspended for three years.
On-site inspection
The penalty follows an on-site inspection by the FSCA as part of its annual regulator engagement schedule, says the fund manager.
The FSCA did not find any evidence that Ashburton facilitated any transactions involving terrorist financing or money laundering.
It found that AFM had failed to identify and verify the identity of some clients “including beneficial owners of clients”.
This includes identifying a person acting on behalf of a client, or a client acting on behalf of another person.
Read:
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Ashburton also failed to screen its clients and their beneficial owners against the Targeted Financial Sanctions Lists (TFSL) issued by the United Nations Security Council. Any clients appearing on this list must be reported to the FIC as soon as possible and steps must be taken to freeze the assets of the client.
Obligations
Accountable institutions such as AFM are required to perform risk assessments on their businesses to identify whether any money laundering or terrorist financing risks appear in their businesses, and put together anti-money laundering and counter-terrorist financing (AML/CTF) policy.
They are also required to submit regular reports to the FIC, and perform due diligence on themselves to identify gaps and create controls to close any potential for money laundering and terrorism financing.
“The FSCA views the above as serious violations of the FIC Act, particularly in light of the nature, size, complexity and potential risk exposure of AFM’s business,” says the FSCA in a statement.
“The requirement to understand and mitigate money laundering and terrorist financing risks through the implementation of an 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.”
Read:
South Africa eyes exiting FATF grey list in 2025
Can SA remove itself from the dreaded grey list by early 2025?
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, according to the FSCA.
“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.”
