/ 28 June 2024

FSCA imposes fines of almost R1 billion on dodgy operators


The Financial Sector Conduct Authority (FSCA) slapped individuals and businesses that flouted financial and banking regulations with almost R1 billion in administrative penalties during the 2023-24 financial year.

FSCA commissioner Unathi Kamlana, speaking during the release of its latest Regulatory Actions Report, said the regulator had imposed a total of more than R943 million in fines during the period 1 April 2023 to 31 March 2024.

He said the report highlighted specific “areas of heightened risk in the financial sector” that the regulator has identified.

“Those include duties of retirement fund trustees, issues around fairness, CFT [countering the financing of terrorism] non-compliance, regulatory examination fraud, unregistered financial services and financial services business submission of fictitious insurance policies,” he said.

“Importantly, within the context of the fact of grey listing, it’s become so much more relevant to act, to demonstrate visible action, to ensure compliance in terms of AML [anti-money laundering]/CFT obligations of the financial institutions within our purview.”

Kamlana said the regulator was also engaged in “increasing collaboration and cooperation with our international counterparts” as this is of growing strategic importance because of the cross-border nature of financial services.

“We want to emphasise that, when we do take decisive and visible actions against wrongdoers, we send a clear message to the financial sector, to financial institutions and to individuals in the financial sector that noncompliance with financial sector laws will not be tolerated,” he said.

FSCA divisional executive of enforcement Gerhard van Deventer said the fines, which had grown from around just R100 million in the 2022-23 financial year, had been imposed on 31 persons during the period under review.

Among the significant penalties imposed were:

◦        R475 million on Markus Jooste (market abuse);

◦        R216 million on Coenraad Botha (Banks Act);

◦        R143 million on Jacobus Geldenhuis (Banks Act); and

◦        R58.7 million on My Wealth Method (Pty) Ltd (Banks Act).

He said there had also been a significant increase in AML/CFT penalties including a 
R16 million fine imposed on Ashburton Fund Managers.

The FSCA executed a total of 1 564 enforcement interventions (excluding the 418 completed investigations) during the year under review, according to the report. There was a 21% increase in the number of ongoing cases to 375 open cases under investigation.

“This is attributed primarily to a noticeable uptick in the number of complex investigation cases and an increase in legal challenges against both the investigations and the sanctions imposed,” Van Deventer said.

He said most of the new, ongoing and finalised investigations involve contraventions of the Financial Advisors and Intermediary Services Act and the Insurance Act, mostly related to unregistered business, including in the funeral insurance sector.

According to the report, the financial service providers debarred a total of 1 312 representatives, of which 95% were removed for dishonest conduct, representing a 15% increase compared to 2022-23.

The FSCA debarred a total of 156 service providers, a slight increase from 140 during 2022-23, suspended 1 061 licences and withdrew 75 licences for the period.

“A significant number of these debarments relate to representatives submitting false policies. This is where a representative gets hold of personal information of somebody and then submits a false policy and benefits by getting the commission. This has been an issue for the FSCA during the last report. It’s still an issue for the HCA, and we will continue to focus on this issue,” Van Deventer said.

The FSCA also collaborated on 45 matters with international counterparts and became a signatory to the International Organisation of Securities Commission’s (IOSCO) Enhanced Multilateral Memorandum of Understanding that aims to enhance the effectiveness of cross-border investigations and enforcement.

Trends and other focus areas that the regular is working on include clamping down on unauthorised crypto-related financial services; copy trading; signals and introducing brokers; solicitations to invest in livestock; “finfluencers” (online personalities offering financial advice); lack of oversight by key individuals; unauthorised insurance business in the funeral parlour industry and construction guarantee policies that have not been underwritten.

In addition, deep fake scams, impersonations, exploitation of consumers via social media platforms and a failure to implement an anti-money laundering programme are also in the spotlight.

He said the FSCA was committed to warning the public about financial scams and unregistered businesses.

“By our estimation, consumer education campaigns in the last year have reached approximately or more than 67 million consumers and we certainly hope that we have saved many people from putting their money down black holes,” Van Derventer said.

FSCA deputy commissioner Katherine Gibson said the online nature of financial services globally presented both opportunities and risks to the industry.

“Modern technology brings a lot of opportunity, but of course, it brings lots of risk and, most notably, because we get a breach very quickly and that then makes it increasingly difficult for regulators to respond to. Assets can, in effect, be moved almost immediately, overnight as well, and it’s very difficult to trace those as regulators and enforcement authorities,” Gibson said.

She said enforcement is the “last line” of defence and it was important to focus on increasing its warnings to the public, especially about unauthorised online trading and crypto-currency trading.

“A constant message that we’re wanting to put out is for consumers themselves to be making very sure that the entities they’re engaging with are legitimate, licensed and authorised to be doing the business that they’re doing,” Gibson said.

She said consumers should also go a step further to scrutinise the licences that service providers hold to ensure they are authorised to conduct the services they are presenting to the public.

Consumers can check whether an entity or person is suitably authorised before any purchase or investment is made by calling 0800 110 443 (toll-free) or conducting an online search for an authorised financial institution by licence category here or by searching here.