R7.8m penalty stands as law firm loses FIC appeal, heads to court

The Financial Intelligence Centre (FIC) appeal board dismissed an appeal lodged by Kunene Ramapala Incorporated, a firm of attorneys, after it received a R7.8 million penalty for non-compliance.

The law firm is now instituting a review application in the High Court against the FIC’s appeal board’s decision to reject its appeal.

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Failure to comply

In June 2023, the FIC inspected Kunene Ramapala Inc. It was found that the firm did not comply with the FIC Act’s requirements to document, maintain, and implement a risk management and compliance programme and scrutinise clients against the targeted financial sanctions list.

In addition, the firm failed to comply with directives, including failure to update its registration details, as well as neglecting to file a risk and compliance return questionnaire within a specific timeframe.

The FIC determined that the firm was grossly negligent and consequently instituted a financial penalty of R7.8 million on four instances of compliance negligence.

Over and above the financial penalty, remedial directives were issued.

However, the firm appealed the FICs, arguing that the penalties were “excessively harsh and punitive.”

Importantly, the firm did concede the merits of the penalty and admitted its previous failure to comply.

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Appeal rejected

The FIC’s appeal board found that the appellant was aware of its compliance obligations and that the institution had acted with gross negligence and wilfully failed to comply with its obligations under the FIC Act.

The firm’s claim that the FIC’s penalties were disproportionate is unfounded, the appeal board notes.

“The sanctions imposed were not startlingly inappropriate nor based on any error in the FIC’s evaluation of the facts or interpretation of the law. The FIC took a holistic approach in determining sanctions with deterrence being the primary goal, and the appeal board has endorsed the FIC’s approach,” it notes.

Christopher Malan, executive manager for compliance and prevention at the FIC, says the authority has consistently on public platforms pleaded with attorneys to comply with the FIC Act.

“The outcome of this appeal is a clear message that non-compliance … may have serious consequences,” he says.

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This article was republished from Moneyweb. Read the original here.