The Financial Sector Conduct Authority (FSCA) has imposed almost R1 billion in administrative fines on individuals and companies who flouted financial and banking regulations in the 2023-24 financial year.
FSCA commissioner Unathi Kamlana, during the release of the latest regulatory action report, said the regulator had imposed fines totalling more than R943 million between 1 April 2023 and 31 March 2024.
He said the report highlighted “specific areas of heightened risk in the financial sector” identified by regulators.
“This includes the duties of retirement fund trustees, issues of impartiality, the CFT [countering the financing of terrorism] He said the investigation would look into “non-compliance, regulatory examination fraud, unregistered financial services and submission of fictitious insurance policies by financial services businesses.”
“The key point is that in the factual context of the grey listing, it becomes much more important to take action, show visible behaviour and ensure compliance from an AML perspective. [anti-money laundering]/CFT obligations of financial institutions within our jurisdiction.”
Kamrana said the regulator was also working to “strengthen engagement and cooperation with our international counterparts” as this is of increasing strategic importance due to the cross-border nature of financial services.
“We want to stress that as we take firm and visible action against wrongdoers, we send a clear message to the financial industry, financial institutions and individuals in the financial industry that non-compliance with the law in the financial industry will not be tolerated,” he said.
Gerhard van Deventer, from the FSCA enforcement division, said the fines were up from about R100 million in the 2022-23 financial year and were imposed on 31 people during the period under investigation.
The significant penalties imposed included:
◦ R475 million against Markus Jooste (market abuse)
◦ R216 million for Coenraad Botha (Banking Act)
◦ R143 million to Jacobus Geldenhuis (Banking Act)
◦ R58.7 million to My Wealth Method (Pty) Ltd (Banking Act).
He said there had also been a significant increase in AML/CFT penalties, including a R16 million fine imposed on Ashburton Fund Managers.
According to the report, the FSCA carried out a total of 1,564 enforcement interventions during the year under review (excluding 418 completed investigations). The number of active cases increased by 21%, leaving 375 cases outstanding under investigation.
“This is mainly due to a significant increase in the number of complex investigations and an increase in litigation of both investigations and sanctions imposed,” Van Deventer said.
He said the majority of new, ongoing and closed investigations related to breaches of the Financial Advisor and Intermediary Services Act and the Insurance Act, and most related to unregistered businesses, including in the funeral insurance sector.
The report said financial services providers disqualified a total of 1,312 representatives, of whom 95% were removed for misconduct, a 15% increase compared to 2022-23.
The FSCA disqualified a total of 156 service providers, up slightly from 140 in 2022-23, suspended 1,061 licences and cancelled 75 licences during the period.
“Many of these disqualifications relate to agents submitting false policies, where an agent gets someone's personal information and submits a false policy to obtain a commission. This was an issue for the FSCA in the last report. It remains an issue for the HCA and we will continue to focus on this issue,” Van Deventer said.
The FSCA also cooperated with its international counterparts on 45 cases and signed the International Organization of Securities Commissions' (IOSCO) enhanced multilateral memorandum of understanding aimed at enhancing the effectiveness of cross-border investigations and enforcement.
Trends and other focus areas being addressed by the Standing Committee include a crackdown on unlicensed cryptocurrency-related financial services, copy trading, signal and broker introductions, solicitation of investments in livestock, “finfluencers” (online personalities offering financial advice), lack of oversight by key players, unlicensed insurance operations in the funeral industry, and ununderwritten construction warranty policies.
Additionally, deepfake scams, impersonation, exploitation of consumers via social media platforms, and failure to implement anti-money laundering programs have also been highlighted.
He said the FSCA was committed to warning the public about financial scams and unregistered businesses.
“By our estimates, last year's consumer education campaign reached approximately 67 million consumers and we believe it prevented many people from putting their money into a black hole,” Van Derventer said.
FSCA Deputy Commissioner Katherine Gibson said the move of financial services online was bringing both opportunities and risks to the industry globally.
“Modern technology brings many opportunities but of course many risks too. Most notably, breaches happen quickly, making it increasingly difficult for regulators to respond. Assets can be moved virtually instantly, even overnight, making it extremely difficult for regulators and enforcement authorities to track them,” Gibson said.
She said enforcement was a “last resort” of defense and that it was important to focus on strengthening warnings to the public, especially about unlicensed online transactions and cryptocurrency transactions.
“Our message always is that consumers should be very careful to ensure that the business they're engaging with is legitimate, licensed and authorized to do that business,” Gibson said.
She also said consumers should scrutinise further the licences held by service providers to ensure they are authorised to carry out the services they are offering to the general public.
Consumers can check whether a company or individual is properly licensed before making any purchase or investment by calling 0800 110 443 (freephone), searching online for licensed financial institutions by license category here or searching here .
