Capitec Bank, known as the fastest-growing JSE-listed bank in South Africa, has been imposed a hefty financial penalty of R56.25 million by the South African Reserve Bank (Sarb) for failing to comply with particular anti-money laundering regulations.
The Sarb announced the regulatory sanctions on Capitec Bank Limited through its website on Friday, noting that R10.5 million of the penalty “is conditionally suspended for a period of 36 months, starting from 30 July 2024.”
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As of now, Capitec has not released a statement regarding this matter, and there has been no formal filing on the JSE.
This situation marks another instance of Capitec’s violations of Fica regulations.
Read: Sarb fines Capitec and Deutsche Bank SA a combined total of R15m [May 2016]
The central bank highlighted that “The Prudential Authority [PA], which operates under the Sarb’s administration, is tasked with supervising and ensuring compliance among accountable entities concerning the provisions of the FIC Act, along with any orders, determinations, or directives issued under it.”
“The Sarb has imposed administrative sanctions on Capitec Bank Limited due to its failure to comply with certain provisions of the Financial Intelligence Centre Act 38 of 2001 [FIC Act], following inspections carried out at Capitec Bank under section 45B of the FIC Act in 2021 and 2022.
“The 2021 inspection focused on the retail banking sector, while the 2022 inspection examined Capitec Bank’s business banking sector.”
“The administrative sanctions imposed on Capitec Bank result from its non-compliance with several sections of the FIC Act,” it emphasized.
Penalties
“The sanctions consist of seven cautions, one reprimand, and a financial penalty totaling R56.25 million, with R10.5 million conditionally suspended,” Sarb stated.
The sanctions against Capitec stem from the following non-compliance issues:
A – Capitec failed to fully adhere to sections 21(1) and/or 21A to 21H of the FIC Act, specifically lacking adequate customer due diligence, enhanced due diligence, and continued due diligence for sampled client files.
* Non-compliance instances included deficiencies in:
- Verification of client identity
- Identification of beneficial owners of legal entities
- Obtaining and/or verifying address and source of funds
- Conducting PEP screenings and ongoing due diligence, including annual reviews for high-risk clients
- Securing senior management approval when re-risk rating clients or assessing high-risk clients.
“The PA issued a caution against repeating the actions leading to the non-compliance and imposed a financial penalty of R20 million, with R5 million conditionally suspended for the retail segment, and a financial penalty of R15 million, of which R2 million is conditionally suspended for the business banking segment,” Sarb added.
B – Capitec did not comply with Section 28 of the FIC Act concerning Cash Threshold Reporting (CTRs) to the Financial Intelligence Centre (FIC), as it failed to ensure timely reporting of CTRs and CTRAs.
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“The PA cautioned against repeating the conduct leading to the non-compliance and imposed a financial penalty of R2 million, of which R1 million is conditionally suspended for a period of 36 months,” stated the Sarb.
C – Capitec failed to comply with Section 29 of the FIC Act by not timely reporting Suspicious Transaction Reports (STRs) and/or Suspicious Activity Reports (SARs) to the FIC.
The PA cautioned against repeating the conduct that resulted in the non-compliance and imposed a financial penalty of R5 million.
D – Capitec did not adhere to FIC Act Directive 5 of 2019, as it failed to address Automated Transaction Monitoring System alerts within the stipulated 48-hour timeframe.
The PA issued a caution against repeating the conduct that led to the non-compliance and a financial penalty of R3 million.
E – Capitec faced non-compliance issues regarding Section 42 of the FIC Act concerning its Risk Management and Compliance Programme (RMCP), where it failed to:
• Properly identify, assess, monitor, mitigate, and/or manage risks associated with CTRs/CTRAs for potential reporting under Section 29 of the FIC Act;
• Execute its RMCP associated with enhanced and ongoing due diligence;
• Obtain timely approval from its board of directors for matters related to its RMCP; and
• Evaluate specific risk factors during the onboarding process, such as product risk.
“The PA issued a caution against repeating the conduct leading to the non-compliance, along with a reprimand and a financial penalty totaling R8 million, with R2 million 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 collaborated with the PA and has implemented necessary remedial actions to address the identified compliance gaps and control weaknesses,” it added.
South Africa’s financial regulators have intensified their efforts to remove the country from the ‘grey list’ of the Financial Action Task Force, an international body focusing on anti-money laundering.
Read:
SA is approaching the possibility of exiting the grey list
South Africa on track to exit the dirty-money list by 2025, according to Treasury officials
SARB fines HSBC and Bidvest Bank for their non-compliance
South Africa placed on FATF greylist – [Feb 2023]
Costs for banks and SOEs could rise sharply if South Africa is greylisted [Feb 2023]
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