The FSCA’s tough approach to FSPs whose anti-money measures are found wanting continues, with a financial advisory firm hit with an administrative sanction of R473 000.
The fine was imposed on Centurion-based Du Toit Advisors CC (DTA) following an inspection by the FSCA on 26 January last year, the Authority said in a statement last week.
The FSCA conditionally suspended more than half the fine for three years.
The sanctioning of DTA comes two weeks after the Authority imposed a R16 million fine on Ashburton Fund Managers and a R400 000 penalty on Theuns Vosloo Financial Advisory Services earlier in February for FICA non-compliance.
Read: FSCA fines asset manager R16m for FICA non-compliance
Read: Financial services provider slapped with R400 000 fine for FICA violations
None of the three FSPs was found to have been involved in money-laundering activities. They were sanctioned because, at the time of the FSCA’s inspections, that had not implemented their Risk Management and Compliance Programmes (RMCPs) and had not conducted a proper due diligence on clients.
DTA told Moonstone it had no comment to make on the FSCA’s decision.
The Authority reiterated that it will not tolerate non-compliance with FICA.
“All accountable institutions are urged to continue reviewing and strengthening their anti-money laundering and terrorist financing risk and control environments. Failure to do so will result in firm regulatory action,” the statement said.
Areas of non-compliance
The FSCA said it identified the following areas of non-compliance at the time of the inspection:
DTA’s RMCP for anti-money laundering and counter-terrorist financing was defective because it failed to set out how it would comply with FICA. In addition, DTA failed to implement the RMCP. These were violations of sections 42(1) and (2) of FICA.
Second, because DTA had not implemented an RMCP, the authority of persons acting on behalf of some of its clients had not been identified and verified.
The Authority said this was a violation of section 21(1), which requires an accountable to establish and verify the identity of the client, in accordance with its RMCP, when entering a single transaction or establishing a business relationship with a client.
The third area of non-compliance related to section 21A. When an accountable institution engages with a prospective client to establish a business relationship as contemplated in section 21, the institution must obtain information that reasonably enables the accountable institution to determine whether future transactions performed in the course of the business relationship are consistent with the institution’s knowledge of the prospective client.
The information must include a description of the nature of the business relationship concerned and the source of the funds that the prospective client expects to use in concluding transactions during the business relationship.
The FSCA said, at the time of the inspection, DTA did not, in respect of some clients, obtain the relevant information required, including information describing:
- the nature of its business relationship with prospective clients;
- the intended purpose of these business relationship; and
- the source of the funds the prospective clients expected to use in concluding transactions in the course of the business relationship.
The fourth area of non-compliance concerned section 21B. When a client is a legal person, trust, or similar arrangement between natural persons, an accountable institution must, in addition to the steps required under sections 21 and 21A and in accordance with its RMCP, establish the nature of the client’s business and the ownership and control structure of the client.
At the time of the inspection, the FSCA said, DTA did not:
- establish the ownership and control structure in respect of some clients; and
- establish and verify the identity of the beneficial owner of one client.
Finally, section 21C requires an accountable institution, in accordance with its RMCP, to conduct ongoing due diligence in respect of a business relationship and keep information obtained for the purpose of establishing and verifying the identities of clients pursuant to sections 21, 21A, and 21B of FICA up to date.
At the time of the inspection, DTA failed to evidence conducting of ongoing customer due diligence in respect of some of its clients.
The FSCA suspended R223 000 of the penalty for three years on condition that DTA fully complies with a directive to remediate the deficiencies identified and remains fully compliant with sections 42(1) and (2), section 21(1), section 21A, section 21B, and section 21C of FICA during this period.
Help is at hand
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