Sanlam and Fedgroup join list of FICA offenders – are you next

Sanlam and Fedgroup join list of FICA offenders – are you next?

Sanlam Life and Fedgroup Life have become the latest life insurers to be fined by the SA Reserve Bank (SARB) for not complying with the Financial Intelligence Centre Act (FICA).

Earlier this year, Discovery Life was fined R1.5 million (excluding R500 000 that was suspended for three years) for, among other things, failing to comply with the cash threshold reporting (CTR) requirements in terms of section 28 of FICA.

In July last year, the SARB cautioned and fined Clientele Life for the same offence. It also cautioned Hollard Life Assurance and OUTsurance Life for failing to provide staff with ongoing training in FICA and their respective risk management and compliance programmes, as required by section 43 of FICA.

In a statement in September, SARB said the weaknesses in Sanlam’s and Fedgroup’s money laundering control measures were identified following inspections conducted in 2019.

“It should be noted that the administrative sanctions were imposed because of weaknesses identified with regards to compliance” with the provisions of FICA, not because the life insurers were found to have facilitated transactions involving money laundering or the financing of terrorism, the SARB said.

Sanlam Life

The SARB’s Prudential Authority (PA) cautioned Sanlam Life and fined it R1m for failing to comply with the enhanced due diligence requirements in respect of domestic prominent influential persons (in terms of section 21G of FICA).

The PA also found that Sanlam Life failed to comply with the CTR requirements. It cautioned the life insurer and imposed a penalty of R500 000, suspended for three years, from 28 July 2021.

Sanlam Life was also cautioned for failing to comply with the suspicious transaction reporting requirements in terms of regulations 24(3) and 29(7) of the Money Laundering and Terrorist Financing Control Regulations.

Fedgroup Life

The PA initially fined Fedgroup life a total of R750 000 for:

  • Deficiencies its training material and its failure to train its employees adequately (section 43); and
  • Non-compliance with the governance of anti-money laundering/CFT compliance requirements (section 42A(2)). This failure to comply was linked to the lack of customisation of its risk management and compliance programme, as well as the failure to provide documentary evidence relating to adequate oversight and monitoring in respect of customer due diligence requirements (section 21), the duty to keep records (sections 22 to 24), and requisite reporting related obligations (sections 28, 28A and 29).

Fedgroup appealed to the Appeal Board for the penalties to be reduced, although it did not dispute the non-compliance.

The Appeal Board reduced the penalties of R500 000 (non-compliance with section 43) and R250 000 (section 42A) to R80 000 and R60 000, respectively.

The PA also directed Fedgroup to take remedial action for the non-compliance with section 43 and cautioned it not to repeat the conduct that led to the non-compliance with section 42A.

Although there can be no doubt that these actions were performed as a warning to others to comply with FICA, it should also serve as a shot across the bows for anyone else in the industry who needs to comply with the anti-money laundering legislation. As a first step, we suggest you consider rudimentary training to ascertain:

  • Whether you are subject to FICA; and
  • If so, your obligations and responsibilities.

Click here for information on what Moonstone offers in this regard.

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