
Capitec Bank, known as South Africa’s fastest-growing bank listed on the JSE, has been hit with a substantial financial fine of R56.25 million by the South African Reserve Bank (Sarb) due to failures in complying with specific anti-money laundering regulations.
The Sarb disclosed the regulatory sanctions on Capitec Bank Limited through its website on Friday, noting that R10.5 million of the fine “is conditionally suspended for 36 months, starting from 30 July 2024.”
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As of now, Capitec has not provided any comments on this matter, nor has there been any formal announcement on the JSE.
This is not the first time Capitec has been found in violation of FICA regulations.
Read: Sarb imposes fines on Capitec and Deutsche Bank SA totaling R15m [May 2016]
“The Prudential Authority [PA], operating under the Sarb’s jurisdiction, is tasked with overseeing compliance among accountable entities regarding the Financial Intelligence Centre Act (FIC Act) and any associated orders, determinations, or directives,” the central bank stated.
“The Sarb has enforced administrative sanctions on Capitec Bank Limited due to its failure to comply with specific provisions of the Financial Intelligence Centre Act 38 of 2001 [FIC Act], following inspections conducted at Capitec Bank in 2021 and 2022 under section 45B of the FIC Act.
“The inspection in 2021 focused on the retail banking sector, whereas the 2022 inspection targeted Capitec Bank’s business banking sector.”
“The administrative penalties imposed on Capitec Bank stem from its non-compliance with several sections of the FIC Act,” it highlighted.
Penalties
“The sanctions consist of seven cautions, one reprimand, and a financial penalty totaling R56.25 million, with R10.5 million conditionally suspended,” the Sarb elaborated.
The sanctions against Capitec were due to the following non-compliance issues:
A – Capitec did not adequately comply with sections 21(1) and/or 21A to 21H of the FIC Act, failing to perform sufficient customer due diligence, enhanced due diligence, and ongoing due diligence concerning sampled client files.
* Non-compliance instances included deficiencies in:
- Verification of client identities
- Identification of beneficial owners of legal entities
- Obtaining and/or verifying addresses and sources of funds
- Conducting political exposure screenings and ongoing due diligence, including annual reviews for high-risk clients
- Securing senior management approval when re-evaluating clients’ risk ratings or conducting reviews for high-risk clients.
“The PA cautioned against repeating the actions that led to the non-compliance and imposed a financial penalty of R20 million, of which R5 million is conditionally suspended for the retail segment, in addition to a penalty of R15 million with R2 million conditionally suspended for the business banking segment,” the Sarb added.
B – Capitec did not adhere to Section 28 of the FIC Act concerning Cash Threshold Reporting (CTRs) to the Financial Intelligence Centre (FIC), as it failed to ensure the timely reporting of CTRs and CTRAs.
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“The PA issued a caution against repeating the conduct that resulted in the non-compliance, along with a financial penalty of R2 million, of which R1 million is conditionally suspended for 36 months,” the Sarb stated.
C – Capitec failed to comply with Section 29 of the FIC Act by not promptly reporting Suspicious Transaction Reports (STRs) and/or Suspicious Activity Reports (SARs) to the FIC.
The PA issued a caution against repeating the conduct that led to the non-compliance and enforced a financial penalty of R5 million.
D – Capitec did not comply with FIC Act Directive 5 of 2019, as it failed to address alerts from its Automated Transaction Monitoring System within the mandated 48-hour period.
The PA cautioned against repeating the actions that led to the non-compliance and imposed a financial penalty of R3 million.
E – Capitec exhibited non-compliance issues concerning Section 42 of the FIC Act in relation to its Risk Management and Compliance Programme (RMCP), failing to:
• Properly identify, assess, monitor, mitigate, and/or manage risks associated with CTRs/CTRAs that may need reporting under Section 29 of the FIC Act;
• Implement its RMCP regarding enhanced and ongoing due diligence;
• Secure timely approval from its board of directors for RMCP-related matters; and
• Consider specific risk factors during the client onboarding process, such as product risk.
“The PA cautioned against repeating the conduct that resulted in the non-compliance, along with a reprimand and a total financial penalty of R8 million, of which R2 million is conditionally suspended for the retail segment, and a financial penalty of R3.25 million, with R500,000 conditionally suspended for the business banking segment,” the Sarb reported.
“The PA confirms that Capitec has cooperated with them and taken necessary remedial measures to address the identified compliance deficiencies and control weaknesses,” it added.
South Africa’s financial authorities have ramped up efforts to remove the country from the ‘grey list’ published by the Financial Action Task Force, an international agency focused on anti-money laundering.
Read:
SA nearing the possibility of exiting the grey list
South Africa on track to exit the dirty-money list by 2025, says Treasury official
SARB fines HSBC and Bidvest Bank for their non-compliance
South Africa placed on FATF greylist – [Feb 2023]
Bank and SOE costs could surge if South Africa is greylisted [Feb 2023]
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