Standard Bank was found to have failed to conduct ongoing due diligence on two of its clients, neglecting to perform any due diligence reviews in 2018 and 2019. Picture: Armand Hough/Independent Newspapers
IN a significant regulatory action, Standard Bank of SA (SBSA) is faced with a hefty R13 million fine by the Prudential Authority (PA) due to serious lapses in compliance with the Financial Intelligence Centre Act (Fica).
This penalty, announced on Friday, follows an inspection conducted in 2022 that uncovered multiple instances of non-compliance, raising concerns about the bank’s commitment to maintaining robust anti-money laundering and counter-terrorism financing measures.
The PA’s investigation revealed that SBSA failed to conduct ongoing due diligence on two of its clients, neglecting to perform any due diligence reviews in 2018 and 2019. This oversight is a direct violation of Section 21C of the Fica, which mandates accountable institutions to continuously assess the risk posed by their clients.
The PA has issued a caution to SBSA, urging the bank not to repeat such conduct in the future. “The administrative sanctions imposed on SBSA stem from its failure to comply with certain provisions of the Fica,” the PA said in its statement.
Further compounding the bank’s compliance failures, SBSA was found to have inadequately documented the submission dates of 43 suspicious and unusual transaction reports (STRs) and suspicious and unusual activity reports (SARs), violating section 23(c) of Fica.
The PA again cautioned the bank not to repeat this conduct, emphasising the importance of maintaining accurate records in the fight against financial crime. “The PA is mandated to supervise and enforce compliance by accountable institutions with the provisions of the Fica,” the statement noted, underscoring the regulatory body’s commitment to upholding the law.
The bank’s shortcomings did not stop there. SBSA also failed to timely report a staggering 1 466 cash transaction reports and 17 259 STRs/SARs to the Financial Intelligence Centre (FIC), breaching sections 28 and 29 of Fica.
For these violations, the PA imposed a financial penalty of R4m, highlighting the severity of the bank’s non-compliance. “The PA confirms that SBSA cooperated with the PA and has undertaken the necessary remedial action to address the identified compliance deficiencies and control weaknesses,” the statement read, indicating that while the bank was taking steps to rectify its issues, the consequences of its past actions remain significant.
In a further blow to its compliance record, SBSA was found to have failed to report one STR, resulting in an additional penalty of R1m. Moreover, the bank’s automated transaction monitoring system was not adequately managed, with 75 729 alerts not attended to within the required 48 hours and 94 558 STR/SAR alerts closed beyond the 15-day reporting period as stipulated by regulation 24(3) of Fica.
For these failures, the PA imposed a substantial financial penalty of R8m.
The cumulative effect of these sanctions has raised serious questions about SBSA’s internal controls and risk management practices. The PA’s actions serve as a stark reminder of the critical need for financial institutions to maintain rigorous compliance frameworks.
“The administrative sanctions imposed on SBSA are due to its failure to comply with certain provisions of the Fica,” the PA reiterated, emphasising the importance of adherence to regulatory standards.
The implications of these sanctions extend beyond financial penalties. SBSA now faces increased scrutiny from regulators, which could lead to more frequent inspections and oversight.
The reputational damage stemming from these compliance failures could erode customer trust and confidence, potentially impacting the bank’s market position.
“The PA has issued cautions not to repeat the conduct that led to the non-compliance, indicating that SBSA must enhance its compliance measures to avoid further sanctions in the future,” the PA’s statement highlighted.
As the financial landscape continues to evolve, the importance of compliance with anti-money laundering regulations cannot be overstated. The PA’s decisive action against SBSA serves as a reminder to all accountable institutions of the critical need to uphold the highest standards of compliance.
The financial sector must remain vigilant in its efforts to combat financial crime, ensuring that robust systems and processes are in place to detect and report suspicious activities.
The R13 million fine imposed on SBSA is not just a financial setback; it is a wake-up call for the entire banking industry. As SBSA embarks on its journey to rectify its compliance failures, the broader implications of this case will undoubtedly resonate throughout the financial sector, reinforcing the imperative for accountability and transparency in the fight against financial crime.
The PA’s actions underscore the message that non-compliance will not be tolerated, and institutions must prioritise their compliance obligations to protect the integrity of the financial system.
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