FSCA slaps FirstRand’s Ashburton with R16 million fine

The Financial Sector Conduct Authority (FSCA) imposed a R16 million fine on FirstRand-subsidiary Ashburton Fund Managers for failing to comply with certain provisions of the Financial Intelligence Centre Act (FICA).

Between 17 October and 15 November 2022, the FSCA – as part of its ongoing supervisory activities – conducted an inspection of Ashburton.

The inspection revealed that AFM failed to:

• Develop and implement an adequate risk management and compliance programme (RMCP) to mitigate money laundering and terrorist financing risks.
• Properly identify and verify the identity of some clients, including beneficial owners.
• Screen its clients against the Targeted Financial Sanctions Lists (TFSL).

“The FSCA views the above as serious violations of the FICA, particularly in light of the nature, size, complexity and potential risk exposure of Ashburton’s business,” the regulator said. 

In particular, the FSCA said the requirement to understand and mitigate money laundering and terrorist financing risks through the implementation of an RMCP is vital.

An RMCP assists accountable institutions to protect and maintain the integrity of their own businesses and contributes to the integrity of the South African financial system as a whole.

“Proper customer due diligence and screening of clients is also crucial to help identify and mitigate against suspicious and criminal elements from infiltrating the financial system,” the FSCA explained. 

“This makes it especially important for institutions that operate as part of large financial services groups to demonstrate an elevated level of vigilance when managing their financial crime risks.”

The FSCA, therefore, imposed a R16 million administrative sanction on Ashburton.

The regulator imposed an immediate R10 million fine but suspended the remaining R6 million on condition that Ashburton remediates its deficiencies and remains compliant with the FICA.

“The sanction imposed by the FSCA serves as a strong reminder that non-compliance with the FICA will not be tolerated,” it said. 

“All accountable institutions are urged to continue reviewing and strengthening their anti-money laundering and terrorist financing risk and control environments. Failure to do so will result in firm regulatory action.”

Ashburton said in a recent press statement that R10 million of the penalty has already been paid, with the remaining R6 million suspended for three years. 

The company said it has already commenced a remediation programme to address the shortcomings identified by the FSCA, and the first key milestones have been met.

This programme includes enhancements to Ashburton’s financial crime policies and frameworks, as well as improvements to its client due diligence and screening processes.

The company noted that the FSCA did not find any evidence that Ashburton facilitated any transactions involving terrorist financing or money laundering. 

“Ashburton’s clients’ funds and investments are not affected by this in any way. We fully support the FICA and believe that a robust regulatory environment is crucial to protect our industry, considering South Africa’s greylisting,” said Ashburton Investments CEO Duzi Ndlovu.