Capitec Bank, known as South Africa’s quickest expanding JSE-listed bank, is facing a substantial financial penalty of R56.25 million imposed by the South African Reserve Bank (Sarb) for failing to comply with specific anti-money laundering regulations.

The Sarb announced the regulatory penalties concerning Capitec Bank Limited on its website last Friday, indicating that R10.5 million of this fine “is conditionally suspended for a period of 36 months, starting from 30 July 2024.”

As of now, Capitec has not provided any statements regarding this matter, and no formal announcement has been made on the JSE.

This is not the first time Capitec has been penalized for breaching Fica regulations.

Read: Sarb imposes fines on Capitec and Deutsche Bank SA totaling R15m [May 2016]

“The Prudential Authority [PA], operating under the Sarb’s oversight, is tasked with supervising and ensuring compliance among accountable entities concerning the provisions of the FIC Act and any associated orders, determinations, or directives,” the central bank indicated.

“Sarb has levied administrative sanctions on Capitec Bank Limited for failing to comply with certain aspects of the Financial Intelligence Centre Act 38 of 2001 [FIC Act], following inspections carried out at Capitec in 2021 and 2022 under section 45B of the FIC Act.”

“The inspection in 2021 primarily focused on the retail banking sector, while the 2022 inspection was targeted at Capitec Bank’s business banking sector.”

“The administrative sanctions against Capitec Bank stem from its non-compliance with multiple sections of the FIC Act,” it emphasized.

Penalties

“The sanctions include seven cautions, one reprimand, and a financial penalty amounting to R56.25 million, with R10.5 million conditionally suspended,” stated Sarb.

The sanctions against Capitec were prompted by various non-compliance issues:

A – Capitec did not comply fully with sections 21(1) and/or 21A to 21H of the FIC Act, as it failed to perform adequate customer due diligence, enhanced due diligence, and ongoing due diligence on the sampled client files.

* Specific instances of non-compliance included shortcomings in the following areas:

• Verification of client identity
• Identification of beneficial owners of legal entities
• Obtaining and/or verifying addresses and sources of funds
• Conducting PEP screenings and ongoing due diligence, including annual reviews for high-risk clients
• Securing senior management approval for re-risk rating clients or reviews for high-risk clients.

“The PA issued a caution against repeating the actions that led to the non-compliance and enforced a financial penalty of R20 million, of which R5 million is conditionally suspended for the retail segment, along with a financial penalty of R15 million, with R2 million conditionally suspended for the business banking segment,” Sarb added.

B – Capitec was non-compliant with Section 28 of the FIC Act regarding Cash Threshold Reporting (CTRs) to the Financial Intelligence Centre (FIC), as it failed to ensure timely reporting of CTRs and CTRAs.

“The PA cautioned against repeating the conduct that led to non-compliance, with a financial penalty of R2 million, of which R1 million is conditionally suspended for a period of 36 months,” stated the Sarb.

C – Capitec failed to adhere to section 29 of the FIC Act by not reporting Suspicious Transaction Reports (STRs) and/or Suspicious Activity Reports (SARs) to the FIC in a timely manner.

The PA cautioned against repeating the conduct that led to the non-compliance and imposed a financial penalty of R5 million.

D – Capitec did not comply with FIC Act Directive 5 of 2019, as it failed to address alerts from the Automated Transaction Monitoring System within the required 48-hour timeframe.

The PA issued a caution against repeating the conduct that resulted in non-compliance and imposed a financial penalty of R3 million.

E – Capitec encountered non-compliance issues regarding section 42 of the FIC Act concerning its Risk Management and Compliance Programme (RMCP), where it failed to:
• Properly identify, assess, monitor, mitigate, and/or manage risks associated with CTRs/CTRAs for possible reporting under section 29 of the FIC Act;
• Implement its RMCP concerning enhanced and ongoing due diligence;
• Secure timely approval from its board of directors regarding RMCP matters; and
• Consider specific risk factors during the onboarding process, such as product risk.

“The PA cautioned against repeating the conduct that led to non-compliance, along with a reprimand and a financial penalty totaling R8 million, of which R2 million is conditionally suspended for the retail segment, and a financial penalty of R3.25 million, with R500,000 conditionally suspended for the business banking segment,” reported the Sarb.

“The PA confirms that Capitec has cooperated with the PA and taken necessary remedial actions to correct the identified compliance deficiencies and control weaknesses,” it added.

Efforts by South Africa’s financial regulators have intensified to remove the country from the ‘grey list’ of the Financial Action Task Force, an international anti-money laundering organization.

Read:
SA nearing the possibility of exiting the grey list
South Africa on track to exit the dirty-money list by 2025, says Treasury official
SARB fines HSBC and Bidvest Bank for their non-compliance
South Africa placed on FATF greylist – [Feb 2023]
Bank and SOE costs could surge if South Africa is greylisted [Feb 2023]

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