FICA clampdown in South Africa – no one is spared

The beefed-up consequences of non-compliance with the Financial Intelligence Centre Act (FICA) have shown that the era of leniency is well and truly over.

“FICA is not a suggestion – it’s the law and the law is coming for those who fail to meet their obligations.”

These are the views outlined by Sameer Kumandan, Managing Director (MD) of SearchWorks, South Africa’s largest data aggregation platform.

Very broadly, the FICA empowers the Financial Intelligence Centre (FIC) to apply measures designed to identify the proceeds of crime, combat money laundering, terrorist financing and financing of the proliferation of weapons of mass destruction.

Enforcement has been significantly beefed up after the Financial Action Task Force (FATF) greylisted South Africa due to (among other reasons) inadequate measures against money laundering, terrorist financing, and proliferation financing.

In response, the ramping up of FICA enforcement has left very few spared.

In September, the South African Reserve Bank (SARB) fined Old Mutual R15.9 million for failing to meet customer due diligence requirements, neglecting suspicious transaction reporting, and lacking a proper Risk Management and Compliance Programme (RMCP).

In October, SARB imposed a R9.5 million and R5 million fine on HSBC and Bidvest Bank for non-compliance with FICA, including issues with RMCP, and delayed automated transaction monitoring.

Similarly, Kunene Ramapala Incorporated, a law firm, was fined R7.7 million for FICA violations, including failure to implement an RMCP and improper sharing of goAML login credentials, which was upheld on appeal.

“If anything, these sanctions showcase the consequences of non-compliance and indicate that the era of leniency is well and truly over,” said Kumandan

“They also demonstrate SARB’s commitment to upholding robust financial practices and preventing financial crime [as] FICA is not a suggestion – it’s the law and the law is coming for those who fail to meet their obligations,” he added.

The MD emphasised that the cost of non-compliance extends far beyond penalties.

The reputational harm, operational disruption, and potential erosion of trust—often more damaging than financial losses—can severely impact long-standing business relationships.

Even a minor compliance failure can have catastrophic consequences.

Kumandan said that this intensifies the pressure on all accountable institutions to prioritize compliance, particularly in light of recent updates that broaden the definition of an “accountable institution.”

The revised definition now encompasses crypto-asset providers and high-value goods dealers, among others.

These changes aim to address gaps in current anti-money laundering (AML) and counter-terrorist financing (CFT) measures, ensuring South Africa’s regulations are more closely aligned with international standards.

Beyond greylisting

These obligations have become even more critical, and there has been greater regulatory scrutiny, since the greylisting.

Being placed on FATF’s grey list signals that our country has significant gaps in its efforts to combat money laundering, fraud, and terrorist financing.

When this happened, FATF outlined 22 key areas where we were falling short and set a strict deadline to address these deficiencies – and that deadline is fast approaching.

Currently, six critical items remain unresolved and must be addressed by February 2025.

One of these outstanding issues, which Kumandan said should have already been resolved, was delayed due to insufficient compliance by businesses and trusts, including the financial services firms previously mentioned.

“If we want to be removed from the grey list next year, all accountable institutions must recognise their role in safeguarding South Africa’s financial system,” said Kumandan.

“Compliance is not only a legal requirement, it is also a strategic asset in a business landscape where trust and transparency are becoming ever more important.

“In addition, having the right compliance strategy and infrastructure in place future-proofs businesses against ever-evolving regulatory demands,” he added.

Kumandan said that automated tools can help simplify the compliance process for accountable institutions by streamlining tasks like ID verification and document validation in real time.

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