Major South African asset manager slapped with an R11 million fine

The Financial Sector Conduct Authority (FSCA) has imposed administrative sanctions, including a R10.6 million fine, on Sanlam Collective Investments for failing to properly implement anti-money laundering and counter-terrorism controls.

On Monday, 13 October, the financial sector watchdog announced that Sanlam Collective Investments did not comply with parts of the Financial Intelligence Centre Act (FICA).

This legislation requires certain institutions to develop, document, maintain and implement a Risk Management and Compliance Programme (RMCP) to identify, assess and mitigate money laundering and terrorist financing risks.

The FSCA found that while Sanlam Collective Investments developed this programme, it was not effectively implemented, particularly in respect of its clients’ risk ratings.

In addition, it said this programme was technically deficient, as it did not address specific processes for anti-money laundering and counter-terrorism financing controls. This includes –

• Processes for enhanced due diligence on partnerships
• Examination of complex or unusually large transactions
• Termination of business relationships
• Identification and reporting of reportable transactions

The FSCA explained that these FICA provisions require accountable institutions to identify and verify the identity of clients and beneficial owners and conduct ongoing customer due diligence.

In addition, it requires institutions to take steps and consider filing a report if no customer due diligence can be conducted, as well as conduct enhanced customer due diligence on politically exposed persons deemed to be high risk.

“At the time of inspection, Sanlam Collective Investments had not adequately identified or verified some clients and their beneficial owners, nor had it conducted the required ongoing and enhanced due diligence,” the authority said.

In deciding on the appropriate remedial action in response to these deficiencies, the FSCA considered Sanlam Collective Investments’ previous non-compliance with other laws.

Therefore, the FSCA decided to impose a R10.6 million fine, of which R3.6 million is suspended for a period of two years, on Sanlam Collective Investments.

“The FSCA views the breaches identified at SCI as serious, especially considering the size, complexity and risk exposure of SCI’s business and its position and impact in the South African market,” the authority said.

“An effective RMCP is essential not only for protecting institutions from financial crime but also for safeguarding the integrity of the broader South African financial system.”

The FSCA emphasised the importance of proper due diligence for all clients to help identify and mitigate suspicious and criminal elements from infiltrating the financial system. 

It said financial institutions operating within large, international financial services groups are expected to demonstrate heightened vigilance in this regard.