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The South African Reserve Bank (SARB) imposed administrative sanctions, including a fine of R56.25 million, on Capitec Bank for numerous offences.
On 20 December 2024, the Reserve Bank released a statement regarding the sanctions it imposed on Capitec.
The sanctions followed inspections by the Prudential Authority (PA), which operates within the administration of the SARB.
The inspections revealed that Capitec did not comply with certain provisions of the Financial Intelligence Centre Act 38 of 2001 (FIC Act).
The FIC Act came into effect on 1 July 2003 to fight financial crime, such as money laundering, tax evasion, and terrorist financing activities.
The FIC Act brought South Africa in line with similar legislation in other countries designed to reveal the movement of monies derived from unlawful activities.
It requires financial institutions, including banks like Capitec, to have advanced record-keeping and reporting as stipulated in the FIC Act.
The Prudential Authority (PA) inspected Capitec Bank in 2021, focused on the retail banking segment, and the 2022 inspection focused on the business banking segment.
It discovered that Capitec did not adequately conduct, enhance, and perform ongoing customer due diligence on the sampled client files.
It also did not verify clients’ identities, identify the beneficial owners of legal entities, or obtain and verify the address and source of funds.
Capitec’s non-compliance with the FIC Act extended well beyond recording and keeping accurate client data.
The bank failed to comply with cash threshold reporting (CTRs) to the Financial Intelligence Centre (FIC) with missed deadlines.
It further failed to report suspicious transaction reports (STRs) and suspicious activity reports (SARs) on time.
Capitec did not attend to Automated Transaction Monitoring System alerts within 48 hours and neglected to adhere to the risk management and compliance programme (RMCP).
The extent of the failure to comply with the Financial Intelligence Centre Act forced the Reserve Bank to impose sanctions on Capitec Bank.
These sanctions included seven cautions, one reprimand and a financial penalty totalling R56.25 million.
The Prudential Authority conditionally suspended R10.5 million for 36 months from 30 July 2024.
The Reserve Bank said Capitec had undertaken the necessary remedial action to address the compliance deficiencies and control weaknesses.
Capitec said it has cooperated fully with the Prudential Authority during these inspections and is committed to resolving all identified compliance and control matters.
Importance of accurate client data
The importance of accurate client data and good record-keeping is illustrated through the source of SIM-swap banking fraud.
One of the most important components of SIM-swap fraud is having a bank account, which criminals can use to transfer money to and potentially withdraw it from.
For many years, Capitec was the preferred bank for criminals to use for their nefarious banking fraud activities.
The criminals targeted clients from large banks like Absa and FNB and typically transferred their victims’ funds to Capitec accounts.
The latest South African Reserve Bank sanctions against Capitec Bank explain why criminals preferred using this bank’s services.
If it was possible to open an account with false personal information, it would provide the safety that criminals needed to conduct fraud with less risk of being caught.
This seems to have been the case with Capitec, which has focussed more on growth than adhering to legislative requirements.
source:Capitec Bank hit with serious sanctions – Daily Investor
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