The administrative sanctions imposed on Absa are due to the failure to comply with certain provisions of the FIC Act and consist of two cautions not to repeat the conduct which led to the non-compliance, a reprimand and a financial penalty totalling R10 million
Image: Supplied
The Prudential Authority (PA) has taken decisive action against Absa Bank, imposing administrative sanctions totalling R10 million following an inspection in 2022.
This enforcement is part of the authority's ongoing mandate to ensure accountable institutions adhere to the Financial Intelligence Centre Act (FIC Act) of 2001.
The PA on Friday said that the sanctions arose from serious breaches regarding compliance with customer due diligence regulations aimed at preventing financial crime.
During its investigation, the PA identified significant shortfalls in Absa's adherence to essential provisions of the FIC Act.
The violations included inadequate customer due diligence practices on certain client files, particularly concerning foreign prominent public officials (FPPOs) and politically exposed persons (PEPs) associated with state-owned enterprises.
Specifically, the bank failed to conduct thorough reviews on four FPPO files and two PEPs, which raised concerns about its risk assessment and management strategies.
In addition, the PA noted failures in the monitoring of automated transaction alerts.
It said more than 8 000 alerts were reportedly not attended to within the 48-hour requirement mandated by the FIC Act Directive 5 of 2019. Moreover, several of these alerts were closed after the stipulated reporting period, indicating a troubling lack of timely and robust compliance processes.
The sanctions imposed by the PA comprise two cautions not to repeat the detrimental conduct, a formal reprimand, and a financial penalty that breaks down as a R7m penalty for lapses in customer due diligence, and an additional R3m for the shortcomings related to automated transaction monitoring.
While these measures reflect the seriousness of the infractions, the PA acknowledged Absa's cooperation throughout the investigation and its commitment to implementing remedial actions to rectify the compliance deficiencies identified.
The repercussions of non-compliance with the FIC Act extend beyond financial penalties, as they signal potential vulnerabilities in a bank's operational integrity. The banking sector's ability to mitigate risks associated with financial crime is critical, and failures can undermine trust in both the institution and the broader financial system.
As a leading financial institution, Absa’s commitment to compliance will be closely scrutinised in the wake of these findings. The PA said the bank must demonstrate rigorous adherence to regulatory standards to restore stakeholder confidence and maintain its position in the competitive South African banking landscape
BUSINESS REPORT