Cape Town - The South African Reserve Bank (SARB) has imposed administrative sanctions on Nedbank Limited following its failure to comply with aspects of the administrative provisions of the Financial Intelligence Centre (FIC) Act.
This after SARB warned that the country’s biggest banks, Standard Bank, FirstRand (FNB), Absa Bank, Nedbank and Investec, had to improve their prosecution of financial crimes and their ability to identify and report illegal cash flows and crimes by October this year.
The alternative would be South Africa being placed on an international grey list of countries that pose a threat to the international financial system by the global money laundering watchdog, the Financial Action Task Force, of which the country is a member.
The administrative sanctions imposed in terms of the FIC Act include cautions, reprimands and a total financial penalty of R35 million, of which R15m has been conditionally suspended.
The action by SARB’s Prudential Authority (PA) came as the result of an inspection conducted in 2019 under FIC regulations which mandate it to supervise and enforce compliance with provisions in the FIC Act in respect of the accountable institutions it supervises.
Flowing from these responsibilities, the PA, among other things, inspects accountable institutions to assess whether they have appropriate and adequate measures and controls in place that would enable them to effectively comply with the provisions of the FIC Act.
The PA said: “It is important to highlight that there was no evidence of Nedbank being involved in or facilitating transactions involving money laundering or the financing of terrorism.”
However, at the same time, the PA said Nedbank had failed to provide evidence that it had developed and documented end-to-end procedures and working methods relating to its systems and processes.
The PA also slammed Nedbank for failing to comply with its Risk Management and Compliance Programme obligations in terms of the FIC Act.
For the bank’s failure to comply with its record-keeping obligations in terms of the FIC Act, the PA imposed a reprimand and a financial penalty of R5m, of which R3m has been conditionally suspended for 24 months.
Nedbank also failed to comply with its cash threshold reporting obligations in terms of the FIC Act in that it failed to report a significant number of cash transactions that exceeded the threshold of R24 999.99 and for this, the PA issued a caution, a reprimand and a financial penalty of R25m, of which R10m has been conditionally suspended for 12 months.
The PA said Nedbank failed to comply with section 42(2) of the FIC Act and FIC Directive 5/2019 in that it was unable to timeously determine when a transaction was reportable in terms of section 29 of the FIC Act, and issued a caution, a reprimand and a directive to take remedial action.
All banks in South Africa must file a transaction or an activity with the FIC if they have reasonable grounds to suspect that they have received the proceeds of a criminal offence or seen activities related to a criminal offence.
The FIC has a process for banks to provide notification of failure to report as required by the FIC Act. The FIC issued Directive 03/2014, which allows the banks to engage the FIC on any reporting failures. It also provided information on banks that notified the FIC in terms of this directive.
The PA said: “Nedbank is co-operating with the PA and continues to undertake the necessary remedial actions to address the identified compliance deficiencies and control weaknesses.”
The PA, in its most recent assessment of money laundering, terrorist financing and proliferation financing risk in the banking sector, found that the overall inherent money laundering/terrorist funding risk within the country’s banking sector was assessed to be high.
The PA said that based on the analysed feedback provided by the banks, 15 out of the 34 (44%) banks confirmed that they had conducted a proliferation financing risk assessment in terms of section 42 of the FIC Act.
* Additional reporting by Sizwe Dlamini.