FSCA fines Sanlam unit R10.6 million for anti-money laundering failures

South Africa’s financial regulator has imposed a R10.6 million fine on Sanlam Collective Investments (SCI) for failing to meet anti-money laundering obligations under the Financial Intelligence Centre Act (FIC Act), it said on Monday.

The Financial Sector Conduct Authority (FSCA) said the sanction follows an inspection in March 2024 which uncovered serious compliance failures, including ineffective implementation of SCI’s risk management and compliance programme (RMCP), inadequate due diligence on clients, and deficiencies in identifying and reporting suspicious transactions.

SCI, a unit of financial services giant Sanlam Ltd and a registered manager of collective investment schemes, is classified as an “accountable institution” under the FIC Act, which mandates measures to prevent money laundering and the financing of terrorism.

The FSCA said while SCI had an RMCP in place, it was not properly implemented, particularly in how clients were risk-rated. The programme also lacked adequate procedures for conducting enhanced due diligence on high-risk clients, including politically exposed persons, and for monitoring complex or large transactions.

Inspectors also found SCI had failed to fully identify or verify some clients and their beneficial owners, and had not conducted the required ongoing or enhanced due diligence.

The FSCA said it had also considered SCI’s previous non-compliance with other laws in considering the appropriate sanction. This included an enforceable undertaking entered into by SCI in terms of section 151 of the Financial Sector Regulation Act, No. 9 of 2017 and a previous contravention of section 4(4)(a) of CISCA which resulted in a financial penalty issued against SCI.

In recognition of the remedial steps taken by SCI to date, the FSCA said it has agreed to suspend R3.6m of the R10.6m penalty for a period of two years, conditional upon full remediation and sustained compliance with the relevant provisions of the FIC Act during the suspension period.

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

The FSCA said this sanction underscores that it will not tolerate non-compliance with the FIC Act.

"All accountable institutions are reminded to continually review and enhance their anti-money laundering and counter-terrorism 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," it said. 

Sanlam Collective Investments has not yet publicly commented on the sanction.

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