R30m fine: Sarb nails 5 banks after money-laundering probe

Cape Town - The sanctions imposed on five banks over anti-money laundering measures demonstrate that the country's banking system can't be abused for criminal elements, said the SA Reserve Bank (Sarb).

GBS Mutual Bank, Habib Overseas Bank Limited, Investec Bank, The South African Bank of Athens Limited, and the Johannesburg branch of Standard Chartered Bank were slammed with administrative sanctions, including financial fines.

 Read: Sarb fines 5 SA banks a whopping R30m

This followed inspections conducted in terms of the FIC Act, which mandates the Sarb to ensure that banks have adequate controls in place to combat money laundering and the financing of terrorism.

Investec Bank was fined with the highest financial penalty of R20m, Standard Chartered Bank was hit with R10m, The South African Bank of Athens Limited R3m, Habib Overseas Bank Limited R1m and GBS Mutual Bank R500 000.

Sarb said all banks are co-operating fully to remediate the identified shortcomings.

"The administrative sanctions were not imposed because these banks were found to have facilitated transactions involving money laundering or the financing of terrorism but because of weaknesses in each of the banks’ control measures," the reserve bank pointed out.

Sarb told Fin24 the sanctions demonstrate that the reserve bank and the banks are working closely together to ensure accountable institutions, such as banks comply with the standards set by the Financial Action Task Force (commonly known as the FATF Recommendations), the FIC Act and the Money Laundering and Terrorist Financing Control Regulations.

"This will ensure that the banking system is not used to launder the proceeds of crime (money laundering) or the financing of terrorism."

Sarb explained to Fin24 that Section 45C(3) of the FIC Act sets out the types of administrative sanctions a supervisory body such as the office of the Registrar of Banks may impose on banks for non-compliance with the FIC Act.

Administrative sanctions may include the following:
(a) A caution not to repeat the conduct which led to the non-compliance
(b) A reprimand
(c) A directive to take remedial action or to make specific arrangements
(d) The restriction or suspension of certain specified business activities; or
(e) A financial penalty not exceeding R10m in respect of a natural person and R50m in respect of a legal person
 
When asked how Sarb determines the financial penalty that each bank have to pay, it noted that Section 45C(2) sets out the criteria a supervisory body should consider when determining an appropriate administrative sanction. This includes:

(a) The nature, duration, seriousness and extent of the relevant non-compliance
(b) Whether the institution has previously failed to comply with any law,
(c) Any remedial steps taken by the institution or person to prevent a recurrence of non-compliance;
(d) Any steps taken against the institution
(e) Any other relevant factor, including mitigating factors

Sarb has been active in probing the control measures of banks to stop money laundering and terrorist funding.

Last year Capitec Bank and Deutsche Bank in South Africa were been hit with a collective R15m, while the country’s four largest lenders were fined a total of R125m in 2014.