From CompliNEWS | Financial Service Intelligence Watch
Key AML compliance takeaways from SARB’s administrative sanctions on Monarch
Compli-Serve
The South African Reserve Bank (SARB) imposed administrative sanctions on Monarch Insurance Company Limited (Monarch) following a Financial Intelligence Centre Act (FIC Act) inspection in 2022. The Prudential Authority (PA), which oversees compliance with the FIC Act, identified several areas of non-compliance by Monarch, leading to a series of reprimands, cautions, and financial penalties. Here are the key compliance takeaways:
1. Failure to Register as an Accountable Institution
- Non-compliance – Monarch failed to register with the Financial Intelligence Centre (FIC) as an accountable institution, as required by section 43B of the FIC Act.
- Sanction – The PA imposed a reprimand in terms of section 45C(3)(b) of the FIC Act.
- Takeaway – Institutions must ensure they are duly registered with the FIC to comply with the FIC Act. Registration is a fundamental requirement for all accountable institutions.
2. Inadequate AML/CFT Training
- Non-compliance – Monarch did not provide ongoing anti-money laundering and combating the financing of terrorism (AML/CFT) compliance training to its employees, violating section 43 of the FIC Act.
- Sanction – A caution not to repeat the conduct, along with a financial penalty of R500 000, of which R100 000 was conditionally suspended for 36 months.
- Takeaway – Continuous and comprehensive AML/CFT training is crucial for all employees to ensure they are aware of the regulatory requirements and can identify and report suspicious activities effectively.
3. Inadequate Risk Management and Compliance Programme (RMCP)
- Non-compliance – Monarch failed to adequately develop, document, maintain, and implement its RMCP as per section 42 of the FIC Act. Specifically, Monarch did not: Develop, document, maintain, and implement an RMCP.
- Identify, assess, monitor, mitigate, and manage its money laundering and terrorist financing risks.
- Approve its RMCP.
- Sanction – A caution not to repeat the conduct and a financial penalty of R500 000, of which R100 000 was conditionally suspended for 36 months.
- Takeaway – An effective RMCP is vital for managing money laundering and terrorist financing risks. Institutions must regularly review and update their RMCP to ensure it addresses all potential risks and complies with regulatory standards.
4. Cooperation and Remedial Actions
- Observation – The PA acknowledged Monarch’s cooperation during the process and its efforts to undertake necessary remedial actions to address the identified compliance deficiencies and control weaknesses.
- Takeaway – Cooperation with regulatory authorities and proactive remediation of identified issues can mitigate sanctions and demonstrate a commitment to compliance. Institutions should prioritise prompt and effective corrective actions when compliance gaps are identified.
5. Clarification on Involvement in Illicit Activities
- Clarification – The PA clarified that the administrative sanctions imposed on Monarch were not due to any involvement in or facilitation of transactions related to money laundering or the financing of terrorism.
- Takeaway – The sanctions were a result of non-compliance with procedural and training requirements, not criminal activity. This distinction highlights the importance of maintaining robust compliance processes to prevent regulatory breaches, even in the absence of illicit intent.
The sanctions imposed on Monarch underscore the critical importance of adhering to the FIC Act’s requirements. Institutions must ensure proper registration with the FIC, provide continuous AML/CFT training, and maintain a comprehensive RMCP. Cooperation with regulators and prompt remediation of compliance issues are essential practices for maintaining regulatory compliance and avoiding significant penalties.