Ashburton Fund Managers (Pty) Ltd (AFM) has been fined R16 million by the Financial Sector Conduct Authority (FSCA) for breaching certain provisions of the Financial Intelligence Centre Act, No. 38 of 2001 (FIC Act).
As a fully owned subsidiary of FirstRand, AFM operates as a licensed Financial Services Provider (FSP) under the Financial Advisory and Intermediary Services Act, No. 37 of 2002 (FAIS Act), and serves as an accountable institution under the FIC Act. The FSCA oversees and enforces compliance with the FIC Act among FSPs. The FIC Act’s primary aim is to combat money laundering, terrorist financing, and related criminal activities, mandating full compliance from all designated accountable institutions.
Between October 17 and November 15, 2022, the FSCA conducted an inspection on AFM pursuant to section 45B of the FIC Act as part of its routine supervisory activities.
The inspection uncovered AFM’s failure to adhere to several key provisions of the FIC Act:
- AFM did not develop a comprehensive Risk Management and Compliance Programme (RMCP) for anti-money laundering and counter-terrorist financing, as required by Sections 42(1) and (2) of the FIC Act. The existing RMCP lacked clarity on various aspects of compliance with the FIC Act, including the examination of large or complex transactions and the termination of business relationships.
- AFM failed to adequately identify and verify the identity of certain clients and beneficial owners, as mandated by Sections 21 and 21B of the FIC Act.
- AFM did not screen its clients, including beneficial owners, against the Targeted Financial Sanctions Lists (TFSL) as required by Section 28A, in conjunction with Sections 26A to 26C of the FIC Act.
The FSCA considers these violations grave, especially given the nature and scale of AFM’s operations and the potential risks involved. Effective implementation of an RMCP is essential for accountable institutions to safeguard their businesses and uphold the integrity of the South African financial system.
Furthermore, rigorous customer due diligence and client screening are imperative to detect and mitigate suspicious and criminal activities within the financial system. Therefore, institutions operating within large financial services groups must exercise heightened vigilance in managing financial crime risks.
In recognition of AFM’s remedial efforts, the FSCA has agreed to suspend R6 million of the imposed penalty for three years, provided AFM fully addresses the identified deficiencies and maintains compliance with relevant sections of the FIC Act during this period. AFM must pay the remaining R10 million penalty by February 28, 2024.
The FSCA’s imposition of this penalty underscores its commitment to enforcing compliance with the FIC Act. Accountable institutions are strongly encouraged to continually enhance their anti-money laundering and terrorist financing controls, as failure to do so will result in regulatory action.
