Capitec nailed by Reserve Bank over FICA violations

South Africa’s biggest bank by customers, Capitec, has been hit with a R56 million administrative penalty due to non-compliance with certain provisions of the Finance Intelligence Centre Act (FICA).

The South African Reserve Bank (SARB) Prudential Authority (PA) imposed administrative sanctions on Capitec following inspections of the bank in 2021 and 2022.

The 2021 inspection focused on the retail bank segment, and the 2022 inspection focused on Capitec Bank’s business banking segment.

The fines are due to Capitec’s failure to comply with certain provisions of the FIC Act.

The sanctions consist of seven cautions, one reprimand and a financial penalty totalling R56.25 million, of which R10.5 million is conditionally suspended for a period of 36 months as from 30 July 2024.

The SARB said that Capitec cooperated with the PA and has undertaken the necessary remedial action to address the identified compliance deficiencies and control weaknesses.

According to the SARB, the contraventions include:

Capitec failed to adequately conduct customer due diligence, enhanced due diligence and ongoing due diligence in respect of the sampled client files.

Aspects of non-compliance inter alia included deficiencies concerning the following:

• verification of the identity of client;
• identification of the beneficial owners of legal entities;
• obtaining and/or verification of the address and source of funds;
• conducting PEP screening and ongoing due diligence including annual reviews for high-risk clients; and
• obtaining senior management approval when re-risk rating clients or pertaining to reviews of high-risk clients.

“The PA imposed a caution not to repeat the conduct which led to the non-compliance and a financial penalty of R20 million, of which R5 million is conditionally suspended for a period of 36 months for the retail segment, and a financial penalty of R15 million, of which R2 million is conditionally suspended for a period of 36 months for the business bank segment,” it said.

Capitec failed to inter alia ensure the timeous reporting of cash threshold reports (CTRs) to the FIC.

The PA imposed a caution not to repeat the conduct which led to the non-compliance and a financial penalty of R2 million, of which R1 million is conditionally suspended for a period of 36 months.

Capitec failed to timeously report Suspicious Transaction Reports (STRs) and/or Suspicious Activity Reports (SARs) to the FIC.

The PA imposed a caution not to repeat the conduct which led to the non-compliance and a financial penalty of R5 million.

Capitec failed to attend to Automated Transaction Monitoring System alerts within the required 48-hour period.

The PA imposed a caution not to repeat the conduct which led to the non-compliance and a financial penalty of R3 million.

Finally, Capitec failed to:

• adequately identify, assess, monitor, mitigate and/or manage its risk associated with CTRs/CTRAs for possible reporting in terms of section 29 of the FIC Act;
• implement its RMCP pertaining to enhanced and ongoing due diligence; and
• obtain timeous approval from its board of directors for aspects of its RMCP; and
• consider certain risk factors at the stage of onboarding e.g. product risk

The PA imposed a caution not to repeat the conduct which led to the non-compliance, a reprimand and a financial penalty of R8 million, of which R2 million is conditionally suspended for a period of 36 months for the retail segment, and a financial penalty of R3.25 million, of which R500 000 is conditionally suspended for a period of 36 months for the business bank segment.

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