Sameer Kumandan | Managing Director | SearchWorks | mail me |
Financial Intelligence Centre Act (FICA) Compliance and Penalties are becoming critical considerations for South African businesses, as non-compliance can lead to severe financial and reputational consequences.
What do Old Mutual and HSBC Johannesburg have in common? They are both major financial institutions in South Africa. However, their similarities go beyond just being financial services providers. Both institutions were recently penalised for non-compliance with FICA.
FICA compliance and penalties
In September, the South African Reserve Bank (SARB) imposed sanctions on Old Mutual. The company failed to meet customer due diligence (CDD) obligations. Moreover, it did not report suspicious and unusual transactions within the required timeframe. Old Mutual also neglected to develop and implement a Risk Management and Compliance Programme (RMCP) adequately. Consequently, the company faces a penalty of R15.9 million for non-compliance.
In October, SARB announced a financial penalty for HSBC. The bank failed to comply with certain provisions of FICA. Specifically, HSBC was penalised R9.5 million for offences related to CDD and RMCP compliance failures. It also failed to address automated transaction monitoring system (ATMS) alerts within the required timeframe.
Similarly, Kunene Ramapala Incorporated, a law firm, faced a penalty of R7.7 million for gross negligence. The firm committed multiple FICA compliance failures, including not implementing an RMCP. It also failed to scrutinise clients against the targeted financial sanctions (TFS) list. Additionally, employees shared login credentials on the goAML system, breaching security protocols. This case marked the first appeal of its kind under FICA regulations. Notably, the Appeal Board upheld the FIC’s decision to enforce penalties.
These sanctions highlight the consequences of non-compliance with FICA. They underscore that the era of leniency is over. SARB’s actions demonstrate its commitment to enforcing robust financial practices. Compliance with FICA is not optional; it is the law. Those who fail to meet their obligations will face severe penalties.
The cost of non-compliance extends beyond penalties
Reputational damage, operational disruption and loss of trust can result in worse consequences. Even small compliance lapses have devastating effects. Consequently, accountable institutions face increasing pressure to prioritise compliance measures.
Recent amendments expanded the definition of an ‘accountable institution.’ The updated definition includes crypto-asset providers and high-value goods dealers. These changes aim to close gaps in Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) measures. Furthermore, they align South Africa’s regulations with international standards.
The obligations have become critical since South Africa’s greylisting by the Financial Action Task Force (FATF) last February. Greylisting indicates deficiencies in preventing money laundering, fraud, and terrorist financing within a country. At the time, FATF identified specific deficiencies and set a strict deadline to address them. Notably, this deadline is now fast approaching.
Currently, six outstanding items on the FATF list remain unresolved. One delayed item should have been completed earlier but faced compliance challenges. Low compliance levels by companies and trusts contributed significantly to this delay. All unresolved issues must be addressed before February 2025.
FICA compliance – not only a legal requirement
If South Africa wants to be removed from the grey list next year, all accountable institutions must recognise their role. Compliance is not only a legal requirement; it is a strategic asset. Trust and transparency are becoming increasingly important in the business landscape.
The right compliance strategy and infrastructure future-proof businesses against evolving regulatory demands. Tools like VOCA, powered by SearchWorks, help streamline compliance processes for accountable institutions.
VOCA is a verification, onboarding, and compliance application. It simplifies compliance by automating customer due diligence processes. VOCA ensures adherence to FICA requirements.
When compliance is automated, tasks like ID verification and document validation happen automatically in real-time. This streamlines the onboarding process and reduces the risk of oversight. VOCA understands local regulations, including the latest amendments to FICA.
Businesses don’t have to stress about failing to update their compliance strategies. Automating compliance reduces manual efforts, allowing businesses to focus on their core activities.
