Major international bank hit with sanctions in South Africa-BY Shaun Jacobs

[Nat Quinn]

The Reserve Bank has imposed administrative sanctions on the State Bank of India’s (SBI) South African branch due to its non-compliance with the Financial Intelligence Centre (FIC) Act.

SBI is the 47th largest bank in the world by total assets and ranked 221st in the Fortune Global 500 list of the world’s biggest corporations, being the only Indian bank on the list.

Its main operations in South Africa centre around providing remittance services and local savings accounts, as well as trade financing and corporate loans.

Sanctions were imposed on the local branch of SBI earlier this month following an inspection conducted in May 2020 by the Prudential Authority (PA).

The PA is charged with regulating South Africa’s banking sector and enforcing regulatory compliance of financial institutions.

The administrative sanctions imposed on SBI are a result of its failure to comply with certain provisions of the FIC Act and consist of four cautions and a total financial penalty of R10 million, of which R4.5 million was conditionally suspended for 36 months.

The sanctions imposed on SBI are due to its failure to –

• Comply with customer due diligence obligations

• Comply with cash threshold reporting obligations, failing to provide these reports timeously to the FIC

• The company’s assessment of money laundering and terrorist financing risks was below standard. It lacked clear reasons for the risk ratings, didn’t explain how risks were managed, and didn’t consider all important risk factors.

• The company’s plan for managing risks wasn’t properly documented. It didn’t show who was in charge of approving the plan or how changes were made.

• The system used to watch for suspicious transactions was below standard. It had problems identifying suspicious activity and didn’t properly investigate or explain problems.

SBI cooperated with the PA and undertook the necessary remedial action to address the identified compliance deficiencies and control weaknesses.

The PA emphasised that the administrative sanctions imposed on SBI are not due to its involvement in and/or facilitating any transactions relating to money laundering or the financing of terrorism.

SBI is the second major global bank to be hit with sanctions in the past few months, with the Bank of China slapped with administrative penalties in June.

The Bank of China is majority-owned by the Chinese government and operates extensively around the world, with branches in countries such as the US, Australia, the UK, Germany, Singapore, and South Africa.

Notably, the Bank of China was the first Chinese bank to establish a presence in South Africa, opening its Johannesburg Branch in Sandton in October 2000.

In June, the Reserve Bank announced the imposition of administrative sanctions on the Bank of China’s Johannesburg Branch due to non-compliance with the FIC Act.

Following a FIC inspection in 2021, which reviewed data from 2016 to 2020, the Reserve Bank identified several irregularities and failures in adhering to FIC requirements and FIC Directive 5 of 2019.

As a result, the SARB issued four cautions, a reprimand, and a financial penalty totalling R30.5 million. The Reserve Bank noted that R15.25 million of this penalty is conditionally suspended for 36 months.

The SARB highlighted that the Bank of China did not meet its customer due diligence obligations in South Africa.

Specifically, it failed to conduct appropriate due diligence and enhanced due diligence on sampled customer relationships.

The PA warned against repeating the behaviour that led to non-compliance, which resulted in a R20 million financial penalty.

Additionally, the bank was found to have failed to report suspicious transactions and activities to the Financial Intelligence Centre in a timely manner. It did not respond promptly to automated transaction monitoring system alerts within the required 48-hour period.

 

source:Major international bank hit with sanctions in South Africa – Daily Investor

[Author]

Posts