FSCA fines Mika Finansiële Dienste R1.1 million for FICA non-compliance

The Financial Sector Conduct Authority (FSCA) has imposed an administrative sanction of R1.1 million on Mika Finansiële Dienste for FICA non-compliance because it failed to implement a risk management and compliance programme for anti-money laundering and counter-terrorist financing.

The FSCA says in a statement that Mika Finansiële Dienste failed to comply with provisions of the Financial Intelligence Centre (FIC) Act as a licensed financial services provider under the Financial Advisory and Intermediary Services Act and an accountable institution under the FIC Act.

The FSCA is responsible for supervising and enforcing the compliance of financial service providers with the FIC Act’s objective to help combat money laundering, the financing of terrorism and other related criminal activities. All accountable institutions designated under the FIC Act must comply fully with its requirements.

ALSO READ: Financial crimes: FIC’s new 5% ownership threshold expected to combat corruption

Inspection showed FICA breach

During an inspection in August 2022, the FSCA noticed that Mika Finansiële Dienste was in breach of these provisions of the FIC Act:

• Sections 42(1) and (2): Accountable institutions must develop, document, maintain and implement a risk management and compliance programme for anti-money laundering and counter-terrorist financing. Although Mika Finansiële Dienste developed a programme, it was found to be defective because it failed to outline processes to comply with various provisions of the FIC Act. Mika Finansiële Dienste also did not implement the programme effectively by failing to risk rate most of its customers.
• Section 21B: For clients that are legal entities, trusts, or similar arrangements between natural persons, an accountable institution must establish the nature of the client’s business and its ownership and control structure. At the time of the inspection, Mika Finansiële Dienste failed to establish and verify the beneficial owner of one of its clients.

According to the FSCA, these are serious violations of the FIC Act. “The requirement to understand and mitigate money laundering and terrorist financing risks through the implementation of a risk management and compliance programme 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,” the FSCA says.

“Proper due diligence regarding clients, especially regarding beneficial ownership, is also crucial to help identify and mitigate against suspicious and criminal elements from infiltrating the financial system.”

ALSO READ: Ashburton Fund Managers fined R16 million for not complying with FICA

FSCA acknowledges Mika Finansiële Dienste’s commitment to address shortcomings

However, the FSCA says it acknowledges Mika Finansiële Dienste’s commitment to addressing its shortcomings regarding anti-money laundering and terrorist financing risks and notes its efforts to remediate the identified non-compliance issues.

In recognition of these efforts, R600 000 of the total imposed penalty is suspended for three years, provided that Mika Finansiële Dienste fully complies with a directive to address the identified deficiencies and remains fully compliant with sections 42(1) and (2) and section 21B of the FIC Act during this period.

The FSCA says this sanction serves as a reminder that the authority will not tolerate non-compliance with the FIC Act. All accountable institutions are reminded to continually review and enhance their anti-money laundering and terrorist financing controls and to conduct thorough risk assessments on a regular basis. Failure to do so will result in firm regulatory action.