Prudential authority fines Absa R10 million for FICA non-compliance

The Prudential Authority of the South African Reserve Bank has imposed administrative sanctions totaling R10 million on Absa for not complying with the provisions of FICA that require banks to conduct customer due diligence.

According to a statement issues by the Prudential Authority, which regulates banks and insurance companies, it is mandated to supervise and enforce compliance by accountable institutions with the provisions of the Financial Intelligence Centre Act (FICA) or any order, determination or directive made in terms thereof.

The Prudential Authority conducted an inspection at Absa in 2022 In terms of section 45 B of FICA and as a result of its findings imposed administrative sanctions on Absa due to its non-compliance with certain provisions of FICA.

“The administrative sanctions imposed on Absa are due to its failure to comply with certain provisions of FICA and consist of two cautions not to repeat the conduct which led to the non-compliance, a reprimand and a financial penalty totalling R10 million.

Absa’s R10 million fine for FICA non-compliance

Absa was fined R7 million for failing to fully comply with sections 21(1) and 21A of FICA because it failed to conduct adequate customer due diligence on four of its foreign prominent public official (FPPO) client files and two of its politically exposed persons (PEP) regarding state-owned enterprises.

In addition, Absa failed to conduct adequate enhanced due diligence on three of its domestic prominent influential persons (DPIPs) client files and five of its FFPO client files.

The Prudential Authority also imposed a caution on Absa not to repeat the conduct which led to the non-compliance and a reprimand.

Absa was also fined R3 million for failing to comply with FICA Directive 5 of 2019 to attend to 8 559 reported automated transaction monitoring system (ATMS) alerts within 48 hours.

Absa did not attend to four of the non-reportable ATMS alerts within 48 hours and closed two non-reportable suspicious transaction report/suspicious activity report alerts after the 15-day reporting period as stipulated by regulation 24(3) of the FICA Regulations.

The Prudential Authorly imposed a caution on Absa not to repeat the conduct which led to the non-compliance.

Absa already paid the penalties and the Prudential Authorly confirmed that Absa cooperated with it and has undertaken the necessary remedial action to address the identified compliance deficiencies and control weaknesses.

Why is FICA important?

According to the Banking Association, FICA was introduced to fight financial crime, such as money laundering, tax evasion and terrorist financing activities and brings South Africa in line with similar legislation in other countries designed to reveal the movement of monies derived from unlawful activities and thereby curbing money laundering and other criminal activities.

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FICA places the responsibility on accountable institutions, such as banks, to identify and verify new and existing clients and keep these records of identities of clients and transactions entered into with clients when concluding a single transaction, transactions as part of a business relationship or establishment of a business relationship:

• If the client acts on behalf of a third party, the identity of the third party as well as a copy of the mandate between the client and the third party
• If a third party acts on behalf of a client, the identity of the third party as well as a copy of the mandate between the client and the third party
• The method of identification and verification of particulars
• The exact nature of the transaction or business relationship
• The parties to a transaction as well as the monetary value
• The particulars of the employee or representative that obtained the information
• The information, documentation or forms furnished by the client to verify the information.

In addition, to keeping records, accountable institutions must also meet these requirements:

• Nobody is allowed to destroy any record, except if the destruction was authorised by the responsible person
• Nobody is allowed to amend any record kept in terms of the Act
• Certain large or suspicious transactions must be reported to the Financial Intelligence Centre established by FICA
• They must formulate and implement internal rules consistent with FICA obligation
• Offer compulsory FICA training to employees and
• Appoint a responsible person as a compliance officer to monitor compliance with FICA.

Financial Action Task Force

The Financial Action Task Force (FATF) greylisted South Africa in February 2023 due to its failure to comply with FATF standards and measures to combat illicit financial flows, terrorist funding and potential threats to the integrity of the global financial system.

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FATF is an intergovernmental body established in 1989 by the ministers of its member jurisdictions to protect financial systems and the broader economy from threats of money laundering and the financing of terrorism and proliferation, thereby strengthening financial sector integrity and contributing to safety and security.

The Financial Intelligence Centre (FIC) is South Africa’s national centre for the gathering and analysis of financial data to safeguard the integrity of the country’s financial system and its institutions. The Financial Intelligence Centre Act (FICA) mandates the FIC to assist in the identification of the proceeds of crime and assist in combating money laundering, terrorist financing and proliferation financing to facilitate effective supervision and enforcement of the Act.

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