Financial crime crackdown in South Africa – with record fines

South Africa’s Financial Sector Conduct Authority (FSCA) imposed record penalties in the year through March 2024 to deter crimes, ramping up enforcement as part of efforts to expedite the country’s exit from a global dirty-money “grey list.”

The regulator said in a report Friday that it took 1,323 administrative actions over the period, and imposed fines in excess of R943 million ($51.8 million) on 33 individuals, a more than ninefold increase from the R100 million slapped in the prior year. 

These actions “act as a credible deterrent to behaviour which we see as harmful to financial customers and/or to financial markets as a whole,” FSCA Commissioner Unathi Kamlana said in an online briefing on Friday.

The increase in enforcement comes as South Africa attempts to get itself removed from the Paris-based Financial Action Task Force’s watch list.

The FATF is an international standard-setting body that aims to prevent money laundering and terrorist financing. The African nation was added to the FATF’s so-called gray list last year after being found to have failed to adequately tackle illicit financial flows.

Countries on the FATF list are subject to increased monitoring and are asked to put safeguards in place to tackle such crimes.

Featuring on that list can make foreign investors more wary of doing business there. A 2021 International Monetary Fund report found that gray-listed countries experienced “a large and statistically significant reduction in capital inflows.” 

As for South Africa, the FATF has issued an action plan that includes 22 specific recommendations that will serve as a road map for strengthening the country’s ability to combat sophisticated financial crimes and removing it from the gray list by 2025.

According to the South African Reserve Bank, the country has addressed five of the action items, while 17 remain in progress.

The FSCA said the biggest fine was levied on Markus Jooste, the former chief executive officer of collapsed global retailer Steinhoff International Holdings NV. The regulator imposed a R475 million fine for making and publishing false, misleading or deceptive statements about the company. 

Jooste died in the days after the regulator imposed the fine, but the regulator said it is legally entitled to recover the penalty from his estate. 

“We will be lodging a claim against his estate for the penalty,” Gerhard van Deventer, the divisional executive of enforcement at the FSCA, said at the same briefing.