FSCA Cracks Down with Nearly R1 Billion in Fines for Non-Compliance

The Financial Sector Conduct Authority (FSCA) has ramped up its enforcement actions, imposing nearly R943 million in administrative penalties for non-compliance during the 2023/24 financial year, up from R100 million the previous year. This increase comes as South Africa strives to meet the Financial Action Task Force's (FATF) requirements to get off the 'grey list.' Similarly, the Financial Intelligence Centre (FIC) also highlighted that compliance levels in non-financial sectors remain inadequate.

Harsh Sanctions for Non-compliance

Non-compliance within the financial sector is being met with harsh sanctions as the FSCA strives to protect the integrity of South Africa's financial system. Some of the key reasons for the penalties include failure to adhere to anti-money laundering (AML) regulations, inadequate counter-terrorism financing measures, and insufficient risk management practices by financial institutions. During the 2023/24 period, the FSCA finalized 418 investigations, suspended 1,061 financial services provider licenses, and debarred 156 individuals for regulatory infractions.

The FIC noted poor submission rates for risk and compliance returns (RCRs) among legal practitioners, estate agents, trust service providers, and company service providers. This lack of compliance, especially in high-risk sectors, has been identified as a significant hindrance to South Africa's progress in demonstrating effective risk identification and mitigation, as required by the FATF. The FIC issued administrative sanctions to many accountable institutions that failed to submit RCRs.

Compliance is Key

For accountants, ensuring your clients' adherence to financial regulations is crucial to avoid significant fines and enforcement actions. The FSCA’s intensified crackdown serves as a reminder of the importance of robust compliance programs, particularly regarding AML obligations and risk management. Accountants play a proactive role in assisting clients to understand and fulfill these regulatory responsibilities, as failures could expose them to substantial penalties and further jeopardise South Africa’s standing on the international stage.