Major South African bank hit with sanctions

Absa has been hit with administrative sanctions by the Reserve Bank’s Prudential Authority (PA) as a result of non-compliance with certain provisions of the Financial Intelligence Centre (FIC) Act. 

The PA revealed this late on Friday, 25 April, in a media statement outlining the sanctions placed on South Africa’s third-largest bank by assets. 

The authority is South Africa’s banking regulator, which is mandated to supervise and enforce compliance by South Africa’s financial institutions. 

“The PA has imposed administrative sanctions on Absa Bank Limited (Absa) as a result of its non-compliance with certain provisions of the FIC Act, following an inspection conducted on Absa, in terms of section 45B of the FIC Act in 2022,” the statement read. 

“The administrative sanctions imposed on Absa are due to the failure to comply with certain provisions of the FIC Act and consist of two cautions not to repeat the conduct which led to the non-compliance, a reprimand and a financial penalty totalling R10 million.”

The sanctions from the PA on Absa stem from the following non-compliance –

Absa failed to fully comply with sections 21(1) and 21A of the FIC Act in that it failed to adequately conduct customer due diligence and enhanced due diligence in respect of the sampled client files as follows: 

• failure to adequately conduct customer due diligence on four of its foreign prominent public official (FPPO) client files and two of its politically exposed persons (PEP) in respect of state-owned enterprises; and
• failure to adequately conduct enhanced due diligence on three of its domestic prominent influential persons (DPIPs) client files and five of its FFPO client files. The PA imposed a caution not to repeat the conduct which led to the non-compliance, a reprimand and a financial penalty of R7 million.

The PA imposed a caution not to repeat the conduct which led to the non-compliance, a reprimand and a financial penalty of R7 million.

Absa also failed to comply with FIC Act Directive 5 of 2019 in that –

• two non-reportable suspicious transaction report/suspicious activity report alerts were closed beyond the 15-day reporting period as stipulated by regulation 24(3) of the FIC Act Regulations.
• 8,559 reported automated transaction monitoring system (ATMS) alerts were not timeously attended to within 48 hours 
• four of the non-reportable ATMS alerts were not attended to within 48 hours

The PA imposed a caution not to repeat the conduct which led to the non-compliance and a financial penalty of R3 million.

Absa cooperated with the PA and has undertaken the necessary remedial action to address the identified compliance deficiencies and control weaknesses.