From CompliNEWS | Financial Service Intelligence Watch
FSCA imposes R1.1m administrative sanction on Mika Finansiele Dienste (Pty) Ltd (FSP 2046) due to significant FICA compliance failures
The Financial Sector Conduct Authority (FSCA) has issued an administrative sanction of R1.1 million on Mika Finansiele Dienste (Pty) Ltd (MFD) for failing to comply with critical provisions of the Financial Intelligence Centre Act 38 of 2001 (FIC Act).
MFD, a licensed Financial Services Provider (FSP) under the Financial Advisory and Intermediary Services Act 37 of 2002 (FAIS Act), is classified as an accountable institution under the FIC Act. The FSCA, as the supervisory authority, is responsible for enforcing the FIC Act to ensure that FSPs adhere to regulations designed to combat money laundering and terrorist financing. The FIC Act mandates that accountable institutions, such as MFD, comply fully with its requirements to maintain the integrity of the financial system.
Following an inspection of MFD on 30 August 2022, the FSCA uncovered significant deficiencies in its compliance with the FIC Act, specifically the following violations:
Section 42(1) and (2) – Accountable institutions are required to develop, maintain, and effectively implement a Risk Management and Compliance Programme (RMCP) for anti-money laundering and counter-terrorist financing. While MFD had developed an RMCP, it was found to be inadequate, failing to address critical processes required by the FIC Act. Additionally, MFD failed to implement the RMCP effectively, with the most notable issue being its failure to properly risk-rate the majority of its customers.
Section 21B – For clients that are legal entities, trusts, or similar arrangements between natural persons, accountable institutions must establish and verify the nature of the client’s business and its ownership and control structure. During the inspection, MFD was found to have failed in verifying the beneficial owner of one client.
The FSCA has identified these shortcomings as serious breaches of the FIC Act. The RMCP is a key requirement, as it enables institutions to protect themselves and the wider financial system from the risks of money laundering and terrorist financing. Similarly, proper due diligence, especially in verifying beneficial ownership, is essential for preventing suspicious and criminal elements from accessing the financial system.
While MFD has committed to rectifying its shortcomings and taken steps to remediate the non-compliance issues, the FSCA has imposed a penalty. However, £600 000 of the total penalty is suspended for three years, contingent on MFD fully complying with the directive to address these deficiencies and maintaining compliance with section 42(1) and (2) and section 21B of the FIC Act during this period.