All companies must adhere to Fica by combatting money laundering and the financing of terrorism through prescribed processes.
The FSCA has fined Sanlam Collective Investments R10.6 million for failing to comply with Fica and instructed it to address the identified contraventions. The company was also cautioned against future breaches.
The Financial Sector Conduct Authority (FSCA) imposed the administrative sanctions against Sanlam Collective Investments for failing to comply with certain provisions of the Financial Intelligence Centre Act (Fica).
Sanlam Collective Investments is a registered manager of collective investment schemes in terms of the Collective Investment Schemes Control Act and an accountable institution under Fica. The FSCA is responsible for supervising and enforcing compliance with Fica by managers of collective investment schemes.
Fica aims to combat money laundering, the financing of terrorism and other related criminal activities. All accountable institutions designated under Fica must comply fully with its requirements.
ALSO READ: FSCA fines 3 financial services providers R1.2 million for Fica non-compliance
FSCA showed non-compliance with Fica
According to the FSCA, it conducted an inspection at Sanlam Collective Investments in March 2024 as part of its ongoing supervisory activities under Fica and found that the company was in breach of these provisions of Fica:
- Sections 42(1) and (2) provide that accountable institutions are required to develop, document, maintain and implement a Risk Management and Compliance Programme (RMCP) to identify, assess and mitigate money laundering and terrorist financing risks.
While Sanlam developed an RMCP, it was not effectively implemented, particularly regarding the risk rating of its clients.
In addition, the RMCP was technically deficient because it did not adequately address:
- Processes for enhanced due diligence on partnerships (section 42(2)(f))
- Examining complex or unusually large transactions (section 42(2)(h))
- Termination of business relationships (section 42(2)(k))
- Identification and reporting of reportable transactions (sections 42(2)(o) and (p)) and
- Justification for inapplicable section 42(2) requirements.
- Sections 20A, 21, 21A, 21B, 21C, 21E and 21F to 21H that require accountable institutions to identify and verify the identity of clients and beneficial owners, conduct ongoing customer due diligence, take steps and consider filing a report if no customer due diligence can be conducted and conduct enhanced customer due diligence on politically exposed persons who are deemed to be high risk.
At the time of the inspection, the FSCA found Sanlam did not adequately identify or verify some clients and their beneficial owners and also did not conduct the required ongoing and enhanced due diligence.
ALSO READ: FSCA fines Ninety One Fund Managers R3 million for Fica non-compliance
Previous non-compliance with Fica considered for FSCA fine
The FSCA says it also considered Sanlam’s previous non-compliance with other laws in considering the appropriate sanction, including an enforceable undertaking entered into by Sanlam in terms of section 151 of the Financial Sector Regulation Act and a previous contravention of section 4(4)(a), which resulted in a financial penalty issued against the company.
“In recognition of the remedial steps taken by Sanlam Collective Investments until now, the FSCA agreed to suspend R3.6 million of the R10.6 million penalty for two years, conditional upon full remediation and sustained compliance with the relevant provisions of Fica during the suspension period,” the FSCA says.
“The FSCA views the breaches identified at Sanlam Collective Investments as serious, especially considering the size, complexity and risk exposure of its business and its position and impact in the South African market. An effective RMCP is essential not only for protecting institutions from financial crime but also for safeguarding the integrity of the broader South African financial system.”
ALSO READ: The actual cost of non-compliance with Fica
Proper due diligence important for Fica and keeping criminals out of financial system
In addition, the FSCA says 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 FSCA says this sanction underscores that it will not tolerate non-compliance with Fica. “We remind all accountable institutions to continually review and enhance their anti-money laundering and counter-terrorism financing controls at the highest levels and conduct thorough risk assessments on a regular basis. Failure to do so will result in firm regulatory action.”
