5 major banks slapped with fines in South Africa

 ·10 Oct 2024

Several major banks have been hit with administrative sanctions across South Africa.

The Prudential Authority (PA), which operates within the administration of the South African Reserve Bank (SARB), is mandated to supervise and enforce accountability institutions’ compliance with the provisions of the Financial Intelligence Centre (FIC) act or any order or directive made in terms thereof.

The PA regulates banks, insurers, cooperative financial institutions, financial conglomerates and other specific market infrastructures.

Amid South Africa’s more significant push to get off the Financial Action Task Force’s (FATF’s) greylist, the PA has also issued administrative sanctions nationwide.

The PA received one of the 22 action areas that South Africa must address before it can get off the greylist.

The FATF also said that the fines issued by the PA weren’t substantial enough for the severity of the offences seen.

Overall, nine financial service providers have been fined since June, five of which are banks.

These banks include:

  • Sasfin Bank

  • HSBC Bank

  • Bidvest Bank

  • State Bank of India

  • Bank of China

Old Mutual, set to establish a bank next year, was also sanctioned administratively, but this was related to its life insurance business.


Sasfin Bank

Sasfin Bank announced in August that it received a R210 million fine from the PA.

The administrative sanctions from the PA were imposed under the Banks Act, Financial Sector Regulation Act, and Financial Intelligence Centre Act.

The full total was R209.7 million, but R49.1 million was suspended. Thus, the net sanctions amounted to R160.6 million.

Sasfin said that the fine was due to allegations of historic non-compliance within Sasfin Bank’s discontinued foreign exchange business, which has been involved in several regulatory issues.

However, it is not the biggest issue facing Sasfin.

Earlier this year, the South African Revenue Service (SARS) issued a civil summons for R4.87 billion plus interests and costs in the form of a damages claim.

The summons came after SARS failed to collect income tax, VAT, and penalties allegedly owed by former foreign exchange clients.

Regarding the business, Sasfin has undergone several changes, including recently selling its Capital Equipment Finance and Commercial Property Finance businesses to African Bank for R3.25 billion.

It also plans to delist from the Johannesburg Stock Exchange (JSE).


HSBC

HSBC was fined for non-compliance with the provisions of the FIC Act following an inspection in 2021.

“The administrative sanctions imposed on HSBC are due to its failure to comply with certain provisions of the FIC Act and consist of three cautions and a financial penalty totalling R9.5 million, of which R4 million is conditionally suspended for a period of 36 months as from 10 June 2024,” said the SARB.

The UK-based bank recently announced that it has reached an agreement to transfer its branch business in South Africa to FirstRand Bank, with it exiting the country.

The group said the transaction would include transferring the branch’s clients and banking assets and liabilities and would provide transferred clients with continued access to banking services in South Africa.


Bidvest Bank

Bidvest Bank was also fined for non-compliance with the provisions of the FIC Act following an inspection conducted in 2022.

The sanctions are due to a failure to comply with the FIC Act and consist of a caution not to repeat the conduct that led to the non-compliance.

A financial penalty of R5 million was imposed, of which R2.5 million was conditionally suspended for 12 months as of 23 August 2024.

The bank is also for sale. In July, the Bidvest Group announced that it would be restructuring its financial services division, including selling Bidvest Bank and FinGlobal.

The “strategic restructuring” will impact Bidvest Financial Services’ division, which provides banking and related products and services to South African corporations, businesses, and consumers.

In following engagements, the group said it was looking for a buyer who could ensure business continuity and lessen the impact on the segment’s 1,500 employees.


State Bank of India

The PA also imposed administrative sanctions on the State Bank of India, South Africa (SBI) for non-compliance with the FIC Act after an FIC inspection in May 2020.

“The administrative sanctions imposed on SBI are as a result of its failure to comply with certain provisions of the FIC Act and consists of four cautions and a total financial penalty of R10 million, of which R4.5 million was conditionally suspended for 36 months as from 13 July 2023,” said the SARB.

SBI is a Fortune 500 company and an Indian multinational, public sector banking and financial services statutory body headquartered in Mumbai, which has operated for over 200 years.


Bank of China

The Bank of China’s Johannesburg branch (BOC Jhb) was also fined for failing to abide by the FIC Act following an inspection in 2021. The assessment involved sampling certain data for the period from 2016 to 2020.

“The administrative sanctions imposed on BOC Jhb result from its failure to comply with certain provisions of the FIC Act and FIC Directive 5 of 2019 and consist of four cautions, a reprimand, and a total financial penalty of R30.5 million,” said the SARB.

“An amount of R15.25 million is conditionally suspended for 36 months as of 19 March 2024.”

Bank of China is the oldest bank in China and the first to have a presence in South Africa. It opened its Johannesburg Branch in early October 2000, located in Sandton, Johannesburg.

The group said its South African branch is essential in promoting trade, economic development and financial activities between Southern Africa and China.


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