/ 29 May 2018

VBS fined R2.5m for flouting money-laundering regulations

The bank’s curator Anoosh Rooplal
A group of listeners are up in arms against public broadcaster SABC’s Phalaphala FM radio station in Limpopo, accusing it of having censored news and on-air discussions about the R2.3-billion VBS Mutual Bank scandal

In 2017, embattled VBS Mutual Bank was fined R2.5-million by the South African Reserve Bank (SARB) for failing to comply with regulations aimed at preventing money laundering and combatting the financing of terrorism.

This is according to the 2017 annual report from the Reserve Bank’s banking supervision department, which was released on Tuesday morning.

The mutual bank — which was put under curatorship in March — was give a R2.5-million fine with R2-million suspended for one year, and given a directive to take remedial action to correct the deficiencies in its controls.

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VBS was fined for not identifying and verifying customers’ details, and failing to report certain cash transactions over R25 000 to the Financial Intelligence Centre (FIC). It also failed to “implement adequate methods in relating to the sanctions screening of customers to ensure that the bank complies with its reporting duties,” the Reserve Bank noted in the report.

It also did not have adequate controls and methods in place to report suspicious and unusual transactions according to the report.

After VBS was placed under curatorship, indications of mismanagement and possible corruption have since emerged, prompting the Reserve Bank to order a forensic investigation into its affairs.

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The bank’s curator Anoosh Rooplal, said recently in court papers that R900-million could not be accounted for and there was evidence of large loans made to directors and related parties that may not be recoverable.

Alongside VBS the China Construction Bank Corporation (CCBC) — which has a Johannesburg branch — was fined a R75-million, with R20-million suspended for three years.

Amongst its infractions the CCBC failed to identify and verify customers’ details, failed to report cash transactions over R25 000 to the FIC, and did not have adequate controls and methods for reporting suspicious and unusual transactions.

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The report did note however that the decision to impose administrative sanctions was not based on evidence that either bank has facilitated money-laundering or the financing of terrorism.