South Africa’s Financial Sector Conduct Authority (FSCA) has imposed an administrative penalty of R10.6 million on Sanlam Collective Investments (SCI) for significant breaches of the Financial Intelligence Centre Act (FIC Act), highlighting shortcomings in the asset manager’s anti-money laundering (AML) compliance framework. The penalty underscores regulatory vigilance in enforcing AML rules to protect the integrity of South Africa’s financial system.
Inspection Findings and Penalty Details
The FSCA conducted an onsite inspection of SCI in March 2024 focusing on client due diligence processes, including client screening, risk classification, enhanced due diligence (EDD), and recordkeeping. The inspection also reviewed SCI’s Risk Management and Compliance Programme (RMCP) under section 42 of the FIC Act, which mandates financial institutions to maintain robust controls to identify, assess, and mitigate risks related to money laundering and terrorist financing.
The inspection revealed that SCI’s RMCP was not effectively implemented, particularly in client risk rating processes. The RMCP was also found technically deficient, failing to address critical components such as enhanced due diligence on partnerships, examination of complex or unusually large transactions, termination of business relationships, and the identification and reporting of reportable transactions. The programme lacked adequate justification for inapplicable regulatory requirements.
Furthermore, SCI failed to comply with multiple key FIC Act sections, including sections 20A, 21, 21A, 21B, 21C, 21E, and 21F-21H. These sections require financial institutions to identify and verify clients and beneficial owners, conduct ongoing due diligence, and perform enhanced due diligence on high-risk politically exposed persons (PEPs). At the time of inspection, SCI had not sufficiently identified or verified some clients and beneficial owners nor conducted the mandated ongoing and enhanced due diligence.
The FSCA noted SCI had previous regulatory breaches, including an enforceable undertaking under the Financial Sector Regulation Act and a past contravention resulting in a financial penalty. These historical compliance lapses were factored into the current penalty decision.
Of the R10.6 million penalty, R3.6 million has been suspended for two years, conditional on SCI’s full remediation of the identified compliance gaps and sustained adherence to the FIC Act during the suspension period. SCI has also been directed to address the contraventions and cautioned against future breaches.
Sanlam’s Compliance Commitment
Sylvester Kgatla, CEO of Sanlam Collective Investments, acknowledged the FSCA’s findings and penalty. He emphasized that SCI fully cooperated with the regulator and valued its role in maintaining the financial sector’s integrity. Kgatla stressed that the investigation did not uncover any evidence of money laundering, terrorist financing, or proliferation financing.
He affirmed that SCI has implemented remedial measures to strengthen its compliance framework and is proactively addressing the FSCA’s concerns. Kgatla reassured clients that their funds and investments remain secure and that SCI is committed to upholding the highest standards of regulatory compliance and operational integrity.
Regulatory Context and Significance
This penalty forms part of the FSCA’s wider enforcement efforts to uphold anti-money laundering standards across South Africa’s financial sector. The FSCA emphasized that an effective RMCP is crucial not only for protecting institutions from financial crime but also for safeguarding the integrity of the broader financial system.
The regulator stressed that financial institutions, especially those operating within large international financial groups, must maintain heightened vigilance in AML controls. The FSCA has made clear that non-compliance with the FIC Act, including weak risk management and deficient customer due diligence practices, will result in firm regulatory action.
The sanction against Sanlam Collective Investments follows similar enforcement actions, such as a R3 million fine against Ninety One Fund Managers earlier this year for comparable FIC Act lapses. The FSCA encourages all accountable institutions to regularly review and enhance their AML and counter-terrorism financing controls, conduct thorough risk assessments, and maintain robust compliance frameworks.
The R10.6 million penalty imposed on Sanlam Collective Investments by the FSCA highlights the increasing regulatory scrutiny on AML compliance within South Africa’s financial sector. The enforcement action serves as a strong reminder for all financial institutions to uphold rigorous client due diligence, implement comprehensive risk management programmes, and maintain ongoing compliance to mitigate risks of money laundering and terrorist financing in the country.
Sanlam’s response signals its commitment to remediate and enhance controls to align fully with the FIC Act, protecting client investments while contributing to the integrity and stability of South Africa’s financial system.
This case underscores the FSCA’s proactive stance in ensuring that all accountable institutions meet their legal obligations under the FIC Act, promoting transparency and accountability across the financial services landscape.