Standard Bank was fined R13 million by Prudential Authority due to infringement of financial rules. In a process of identifying enormous transgressions, Prudential Authority found that Standard Bank had contravened a plethora of FIC Act regulations.
Why the FIC Act Matters
The FIC Act is South Africa’s legislation to curb money laundering and the funding of terrorist crimes. It forces banks under the regulation to watch customer transactions with scrutiny and to report the first trace of malfeasance to the Financial Intelligence Center (FIC). According to the PA, Standard Bank failed to carry out this duty under law.
What Did Standard Bank Do Wrong?
PA’s investigation in 2022 reveals that there were multiple such noncompliances with Standard Bank, which meant that the PA could sanction the bank in terms of six warnings plus R13 million as financial penalty. Here’s a list of their failings:
1. Failing to Conduct Regular Checks on Clients
In 2018 and 2019, Standard Bank did not satisfy ongoing diligence requirements for two of its clients. These checks are to be done frequently to catch any suspicious activity on respective bank accounts. The bank was warned about this situation.
2. Poor Record-Keeping Practices
According to information unearthed by PA, Standard Bank simply failed to keep standards where it came to keeping records of the 43 STRs and SARs that it sent for FIC’s consideration. These records are absolutely necessary to create a bulwark against illegal activities.
3. Late Reporting of Cash Transactions
Standard Bank took with them a substantial delay in reporting 1,466 huge cash transactions which had to be reported accordingly in a stipulated time frame.
4. Delayed Reporting of Suspicious Transactions
On receiving fines for being late in submitting 17,259 suspicious transaction reports, Standard Bank was issued another warning and fine, amounting to R4 million.
5. Failure to Report One Suspicious Transaction
On one occasion, it was entirely overlooked that a transaction was suspicious. This drew another warning, plus an R1 million fine.
6. Ignoring Alerts for Unusual Transactions
Besides that, since the internal system of Standard Bank for flagging unusual transactions was faulty:
- 75,729 alerts were not dealt with within the mandatory 48 hours.
- 94,558 alerts were closed after the unacceptable 15-day deadline.
Standard Bank’s Response and Next Steps
Despite its shortcomings, the South African Reserve Bank confirmed that Standard Bank cooperated throughout the investigation. The bank has acted proactively to address the loot and to strengthen its systems, and has committed to ensuring that such failure will never occur again.
Ensuring Accountability in Banking
The PA is the guardian of regulatory compliance of gaming in the Republic of South Africa’s financial sector. This naysaying setup reminds us of the central risk of accountability in the financial market.
