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Prudential Authority imposes hefty sanctions on three major banks for FIC Act breaches
The Prudential Authority (PA) is mandated to supervise and enforce compliance by accountable institutions with the provisions of the Financial Intelligence Centre Act 38 of 2001 (FIC Act) and with any order, determination or directive made in terms thereof.
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The Prudential Authority (PA) has unleashed a wave of administrative sanctions on three prominent international banks operating within South Africa following notable breaches of the Financial Intelligence Centre (FIC) Act.
This decisive move underscores the authority's commitment to enforcing compliance within the financial sector, as mandated by the South African Reserve Bank (Sarb).
In a recent statement, the PA said it imposed administrative sanctions on Citibank N.A. South Africa Branch (Citibank) as a result of its non-compliance with certain provisions of the FIC followed an inspection conducted on Citibank in 2022 in terms of section 45B of the FIC Act.
"The administrative sanctions imposed on Citibank consist of a caution not to repeat the conduct which led to the non-compliance as well as a financial penalty totalling R6 million, which is fully and conditionally suspended for a period of 12 months as from 5 March 2025," said the PA.
"These administrative sanctions stem from Citibank's failure to comply with section 42 of the FIC Act, in that it failed to implement its Risk Management and Compliance Programme in relation to the assessed advance payment transactions."
The PA said Citibank cooperated and has undertaken the necessary remedial action to address the identified compliance deficiencies and control weaknesses.
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Building on this trend of accountability, HBZ Bank has also found itself in the hot seat, facing a total penalty of R9m due to its own lapses uncovered during a 2022 inspection.
The sanctions against HBZ include three cautions, two reprimands, and a financial penalty — R1.5m of which is conditionally suspended for 24 months, commencing on 5 March 2025.
Specifically, HBZ was found to have neglected its customer due diligence (CDD) obligations under the FIC Act, failing to perform adequate checks on 18 medium-risk and 5 high-risk client files.
The regulator also imposed a caution not to repeat the conduct which led to the non-compliance as well as a reprimand after HBZ failed to comply with sections 22 and 23 of the FIC Act, in that it failed to keep records in relation to one of its high-risk trade finance active and terminated client relationships.
Furthermore, the bank received additional reprimands related to insufficient record-keeping practices concerning high-risk client relationships and the absence of a documented rationale for the inherent risk rating of trade finance transactions.
The third institution caught in this compliance crackdown is the Bank of Taiwan, South Africa Branch (BOTSA). The PA's inspections revealed deficiencies in the bank's management of its RMCP Introduction Manual.
The PA said BOTSA failed to secure necessary approvals from its Executive Committee prior to implementing material changes to this vital document.
Moreover, the bank did not effectively manage the annual reviews of its RMCP and neglected required due diligence measures on assessed correspondent banking relationships, as stated in its governance policy.
It also implemented its RMCP and undertake the requisite due diligence measures in relation to two of its assessed correspondent banking relationships in respect of Vostro accounts; and provide evidence that its Screening of Customers and Transactions Manual had been reviewed and approved after 2020.
"The PA confirms that BOTSA cooperated with the PA and that the bank has undertaken thenecessary remedial action to address the identified compliance deficiencies and control weaknesses," said the PA.
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