Capitec, the largest bank in South Africa by the number of customers, has been fined R56 million for not following some rules in the Finance Intelligence Centre Act (FICA).
The Prudential Authority (PA) of the South African Reserve Bank (SARB) decided to impose these penalties after checking on Capitec in 2021 and 2022. During the 2021 inspection, the focus was on the retail banking part, while the 2022 inspection looked at the business banking section. The fines were given because the bank failed to meet certain requirements by the FIC Act.
According to SARB, the bank violations include:
Neglecting to properly carry out the necessary checks on their customers, including the extra checks and ongoing reviews for the selected client files.
There were several issues of which the bank neglected, including problems with:
- Checking who the client really is;
- Figuring out who actually benefits from legal companies;
- Getting and checking the address and where the money comes from;
- Doing background checks on politically exposed persons and keeping up with regular checks for clients who are considered high-risk;
- And getting approval from higher management when changing the risk level for clients or reviewing high-risk clients.
The PA issued a warning against repeating the actions that resulted in non-compliance, along with a financial penalty of R20 million for the retail segment, of which R5 million is conditionally suspended for 36 months. Additionally, there is a financial penalty of R15 million for the business bank segment, with R2 million conditionally suspended for the same 36-month period, it said.
The penalties include seven warnings, one formal reprimand, and a total fine of R56.25 million. Out of this amount, R10.5 million will be put on hold for 36 months starting from July 30, 2024. SARB mentioned that the bank worked together with the Prudential Authority (PA) and has taken steps to fix the problems.
Capitec Violations According to SARB
- Failed to adequately ensure the timely submission of cash threshold reports (CTRs) to the FIC;
- Failed to promptly submit Suspicious Transaction Reports (STRs) and/or Suspicious Activity Reports (SARs) to the FIC;
- Failed to respond to Automated Transaction Monitoring System alerts within the necessary 48-hour timeframe;
- Failed to identify, evaluate, track, reduce, and manage risks related to CTRs/CTRAs for potential reporting under section 29 of the FIC Act;
- Failed to execute the RMCP related to enhanced and continuous due diligence. Secure timely approval from the board of directors for elements of the RMCP;
- Last, Capitec failed to take into account specific risk factors during the onboarding process, such as product risk.
The PA issued a warning not repeat the same misconducts that caused the problem in the first place. A reprimand and a fine of R8 million was issued, of which R2 million of that is on hold for 36 months for the retail part. For the business bank part, there’s a fine of R3.25 million, with R500,000 also on hold for 36 months.
By Deroic
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