An FSCA press release on 8 July contains details of hefty administrative sanctions imposed on Momentum Wealth (Pty) Ltd and Momentum Collective Investments RF (Pty) Ltd for failing to comply with FICA requirements. What is important to note is the closing sentence:
“With these sanctions the FSCA wants to send a strong message to all institutions regulated by it that non-compliance with the FIC Act will not be tolerated, and that harsh sanctions will be imposed.”
The FSCA inspects Accountable Institutions to assess whether they have appropriate and adequate anti-money laundering and countering of terrorist financing controls and measures in place that would enable them to effectively mitigate the risks of money laundering and terrorist financing and to comply with the provisions of the FIC Act.
Pre-Covid, the Regulator did a lot of practice visits to establish the extent to which smaller FSPs had implemented the various requirements to comply with FICA, and to assist and advise where it was found to be lacking. Since then, we saw some motor dealers receiving fines for misinterpreting the cash threshold regulations.
Momentum was not involved in any illegal transactions. The fines were imposed because the FSCA found weaknesses in its money laundering/terrorist financing control measures which could lead to breaches of the regulations.
The fines were determined as follows:
Momentum Wealth
(a) Momentum Wealth failed to comply with cash threshold reporting (CTR) requirements in terms of section 28 of the FIC Act on historic transactions. The FSCA imposed a financial penalty of R4,800,000.00 in terms of section 45C(3)(e) of the FIC Act.
(b) Momentum Wealth failed to identify, verify, and risk rate a beneficiary in terms of section 21B of the FIC act. A financial penalty of R100,000.00, suspended for three years, was imposed on Momentum Wealth in terms of section 45C(3)(e) of the FIC Act.
Momentum Collective Investments
(a) MCI failed to comply with cash threshold reporting (CTR) requirements in terms of section 28 of the FIC Act on historic transactions. The FSCA imposed a financial penalty of R4,400,000.00 in terms of section 45C(3)(e) of the FIC Act.
(b) MCI failed to risk rate 38 clients in line with its Risk and Management Compliance Programme (RMCP) as required in terms of section 21 of the FIC Act. The FSCA imposed a financial penalty of R1,900,000.00 on MCI in terms of section 45C(3)(e) of the FIC Act.
Prevention is better than cure
Perhaps now is a good time to heed the warning shots across the bow before you take a direct hit like Momentum. Make sure your ducks are in a row. If unsure, find out. You may decide to follow the Russian Roulette strategy, but remember, there is still one bullet after every spin.
