South Africa’s biggest asset manager hit with fine

The Financial Sector Conduct Authority (FSCA) has imposed a R3 million administrative sanction on Ninety One Fund Managers South Africa.

The FSCA announced today that Ninety One failed to comply with certain provisions of the Financial Intelligence Centre Act (FICA). 

The administrative action includes a financial penalty of R3 million, a directive to remediate the identified contraventions and a caution against future breaches.

Ninety One Fund Managers is a registered manager of collective investment schemes in terms of the Collective Investment Schemes Control Act and an accountable institution under the FICA. 

The FICA aims, among other things, to combat money laundering, the financing of terrorism and other related criminal activities. 

“All accountable institutions designated under the FIC Act must comply fully with its requirements,” the FSCA explained.

In September 2023, as part of its ongoing supervisory activities, the FSCA conducted an inspection of Ninety One Fund Managers in terms of section 45B of the FICA.

This inspection revealed that Ninety One Fund Managers was in breach of several provisions of the FICA.

For example, sections 42(1) and (2) require accountable 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.

While Ninety One Fund Managers had developed an RMCP, it failed to implement it effectively, particularly in respect of the risk rating of its clients.

In addition, the RMCP was technically deficient and did not adequately address issues such as performing customer due diligence when suspicious or unusual activity is identified.

Sections 21, 21B and 21C of the FICA also require accountable institutions to identify and verify the identity of clients and beneficial owners, and to conduct ongoing customer due diligence. 

At the time of the FSCA’s inspection, Ninety One Fund Managers had not adequately identified or verified some clients and their beneficial owners, nor had it conducted the required ongoing due diligence.

Appeal and remediation

Ninety One Fund Managers lodged an appeal with the FICA Appeal Board following the imposition of the administrative sanction by the FSCA in November 2024. 

In particular, Ninety One Fund Managers disputed the findings relating to customer due diligence. 

However, after further constructive engagements between the FSCA and Ninety One Fund Managers, the company agreed to a settlement, and the appeal has since been withdrawn. 

The FSCA explained that, in light of remedial actions taken by Ninety One Fund Managers to date, the FSCA has agreed to suspend R500,000 of the R3 million financial penalty for a period of three years.

However, this is conditional upon full remediation and sustained compliance with relevant provisions of the FICA during the suspension period.

“The FSCA views the breaches identified at Ninety One Fund Managers as serious, especially considering the size, complexity and risk exposure of Ninety One Fund Managers’ business as well as 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.”

“Proper due diligence of all clients is crucial to help identify and mitigate against suspicious and criminal elements from infiltrating the financial system.” 

The FSCA said financial institutions operating within large, international financial services groups are expected to demonstrate a heightened level of vigilance in this regard.

“This sanction serves as a reminder that the FSCA will not tolerate non-compliance with the FIC Act,” it said. 

“All accountable institutions are urged to continually review and enhance their anti-money laundering and terrorist financing controls at the highest levels and to conduct thorough risk assessments on a regular basis. Failure to do so will result in firm regulatory action.”