A wake-up call for compliance in Africa: SARB fines Grindrod Bank R10m for FICA non-compliance
In a notable enforcement action, the South African Reserve Bank (SARB) has fined Grindrod Bank R10 million for non-compliance with the Financial Intelligence Centre Act (FIC Act), according to a SARB release.
This non-compliance, identified during a 2020 inspection, has led to administrative action and includes an R10m fine for inadequate customer due diligence, failure to identify ultimate beneficial owners, insufficient risk scoring models, and reliance on third parties for monitoring. And Grindrod Bank has cooperated with the Prudential Authority and undertaken remedial actions.
Importantly, the fine is not for any involvement in money laundering or terrorism financing, yet still serves to highlight the need for compliance as hunts for a clear AML-related conviction to prove to FATF it should be removed from the grey list.
(See SA’s FIC urgent plea to lawyers and estate agents: get compliant to avoid AML penalties, plus: see why you need great AML in property sales and all about micro-credit AML. )
Who and what is Grindrod Bank?
Grindrod Bank has made a significant impact in the financial services sector in South Africa, with an asset base exceeding US$550 million. It primarily caters to high-net-worth individuals, large corporations, and institutions, offering products such as loans, savings, invoice discounting, investments, deposits, property, and corporate finance.
In a significant move, African Bank (amidst its own recovery from financial difficulties) acquired Grindrod Bank in May 2022 for R1.5 billion. This acquisition is a strategic step for African Bank to expand its presence in the business banking sector, leveraging Grindrod Bank's sectoral expertise and existing customer base.
Lawsuits and Acquisitions
Complicating the African Bank deal somewhat, Grindrod Bank is also facing a hefty R100 million lawsuit for failing to report fraud in 2017.
Importance of Compliance in the Banking Sector
These events underscore the critical need for robust compliance systems. The FATF has been pressuring South Africa for more AML-related convictions as part of its efforts to be removed from the grey list.
And, although this case what not AML-related, it’s worth noting the retrospective application of both instances – the fine is for an inspection 3 years ago and the lawsuit almost 6 years ago.
This should emphasize the importance for everyone in the sector to ensure proactive and ongoing AML compliance sooner rather than later.
Consequences of Non-Compliance with AML/CFT Requirements
Non-compliance with Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) requirements can lead to severe consequences for financial institutions, their executives and employees. These include hefty fines and penalties, reputational damage, increased regulatory scrutiny, potential legal actions and even jail time.
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