“When there is uncertainty, it creates opportunity,” says Hjalmar Bekker (pictured), Moonstone’s founder and chief executive, as he reflects on the group’s 25th anniversary.
Moonstone Information Refinery (Pty) Ltd was officially established on 1 April 2000. It was born during a period of significant regulatory upheaval in South Africa’s financial services sector as it anticipated the Financial Advisory and Intermediary Services Act. Indeed, the realisation that FAIS would give rise to the external compliance function was one of the main reasons for Moonstone’s coming into existence.
Read: Moonstone Information Refinery marks 25 years of innovation and expertise
Interestingly, 25 years to the month of MIR’s establishment, the financial sector is experiencing extreme uncertainty as financial markets plunge because of a tariff war and fears that the Government of National Unity (GNU) will collapse. This is in addition to the perennial uncertainty created by the demands placed on the sector by the ever-changing regulatory environment, particularly what the Conduct of Financial Institutions Bill (COFI) will mean for the industry.
Bekker says South Africa has faced political challenges throughout its history, and he remains optimistic about the country’s ability to endure.
“There’s a high level of resilience in the population of South Africa. So, I believe whatever happens with the GNU and with the world, we will work around things, and we will find solutions. And I think we’ll just come out a lot stronger.”
Resilience has been a cornerstone of Moonstone’s success.
Five years after MIR was set up, it established Moonstone Compliance and Risk Management (Pty) Ltd, now South Africa’s largest independent provider of compliance and regulatory risk management services to financial services businesses. These services include assistance with new licence applications and profile changes on the FSCA’s registry.
Moonstone Compliance’s expertise extends into offering a comprehensive set of solutions for compliance with the Financial Intelligence Centre Act (FICA), the National Credit Act, the Protection of Personal Information Act, and the country’s employment legislation.
Moonstone Compliance stands out for its client-centric approach, which transcends basic regulatory compliance to deliver tangible business benefits. Compliance is transformed into a strategic asset.
“The purpose of the solution was never purely just to meet the requirements of the FAIS Act,” Bekker explains. “It was always on how you actually build these processes into your business that would not only meet the outcomes of the Act but also enhance your ability to do business more competitively.”
By embedding compliance into a business’s workflows, Moonstone helps our clients to boost efficiency and profitability – in contrast to the generic, off-the-shelf solutions offered by some of our competitors.
Partnering for unique solutions
Collaboration is at the heart of Moonstone Compliance’s philosophy.
Bekker emphasises the importance of tailoring solutions to each client’s unique circumstances. “That has always been the principle that we applied… no situation is the same… the compliance outcomes that we try to implement should accommodate those differences.”
This bespoke approach ensures that compliance aligns with a client’s specific systems and goals. “If you look at compliance purely as these are the set of outcomes that you need to achieve without anticipating what the impact might be on your workflow… it could be quite disproportionate in terms of the impact on your ultimate profitability,” he warns.
Moonstone’s partnership approach enables our clients to stay agile and competitive in a dynamic regulatory environment.
Paradigm shift to principles-based regulation
COFI will mark a fundamental change in South Africa’s financial regulatory framework, moving away from a rules-based system to a principles-based approach.
Bekker acknowledges the rationale behind this shift but has concerns about its timing and feasibility in the South African context.
“The regulator is trying to move away from rules-based legislation to principles-based legislation. I don’t necessarily think that’s wrong, but I do believe that the market is not ready for that kind of legislation at this stage. I think it works well or better in a more sophisticated, more developed world than in South Africa.”
The transition to a principles-based framework will introduce the potential for significant ambiguity.
Unlike the existing rules-based system, which provides clear, prescriptive guidelines, COFI requires financial services businesses to interpret broad principles and devise their own compliance strategies.
“There’s no guidebook or rule set that you can read, and you can say, okay, ABCD and E. You now have to apply your mind,” Bekker explains. This shift places a heavy burden on regulated entities, many of which may lack the internal expertise to adapt.
“If you’re not really trained to do that, then ultimately to be compliant, you will have to get someone to come and assist you in doing that,” he adds, pointing to the practical challenges businesses will face.
Concern over rising costs
The financial implications of COFI are a concern.
Bekker says his research into countries that have moved towards principles-based legislation found that, in certain cases, the cost of compliance increases significantly “because it is now the responsibility of the entity that’s regulated to try and understand what it is that they need to do to be compliant”.
For many South African businesses, this will mean hiring external consultants or specialists. “And that is going to be expensive,” Bekker warns.
New accountability for compliance officers
COFI also elevates the role and responsibility of compliance officers, a change Bekker views as transformative.
In the proposed framework, compliance officers will be designated as “key persons”, bearing accountability on par with business owners and managers. “It brings in other accountability to people that are compliance officers, different to what the current environment is,” he notes.
This shift reflects the critical role they will play in interpreting and applying principles-based regulations, requiring a higher level of skill and judgment.
For Moonstone, this underscores the value of our experienced team of compliance officers, who are well equipped to meet these heightened demands.
“We have a very large, experienced team that is involved in compliance in financial services specifically,” Bekker notes, “and that would obviously help a lot in interpreting the new requirements and the new outcomes that they want to achieve.” This expertise is invaluable as regulations evolve, particularly with complex shifts such as COFI.
Hjalmar underscores the interpretive demands of such changes: “There’s no guidebook or rule set that you can read… you now have to apply your mind.” Moonstone’s compliance officers excel in this role, offering clarity and actionable guidance where others might struggle.
Implementation challenges for the regulator
Beyond the impact on businesses, Bekker foresees significant hurdles for the FSCA itself. Supervising a principles-based system is inherently more complex than enforcing a rules-based one.
“One of the major challenges that I foresee is that the regulator themselves may find challenges in actually supervising the principles that they are proposing,” he says.
Ensuring consistent interpretation and enforcement across a diverse range of financial institutions will demand a nuanced approach, robust resources, and a high degree of co-ordination – areas where the regulator may face practical difficulties. “There will be multiple challenges for implementation and interpretation,” Bekker predicts.
Importance of AML compliance
FICA compliance and anti-money laundering will remain key priorities for the regulators even once South Africa exits the Financial Action Task Force’s grey list. This ongoing relevance positions AML compliance as a priority not only for FSPs but for all businesses that are accountable institutions.
The amendments to Schedule 1 of FICA have brought many entities into the regulatory net – many of which are totally unfamiliar with and unprepared for the level of scrutiny this entails. A bigger problem is that many of these entities do not even know they are now accountable institutions in terms of FICA.
Bekker singled out high-value goods dealers – such as motor vehicle dealers – as particularly unaware of their obligations: “Many accountable institutions, specifically those that fall under the category of high-value goods dealers, are totally unaware still, even today, that they are accountable institutions.”
This widespread lack of awareness among newly regulated entities creates a significant gap that Moonstone Compliance can bridge, particularly because he foresees that AML will become more complex. The increasing intricacy of AML requirements, driven by global standards and local enforcement, amplifies the need for expert guidance.
Looking ahead
Moonstone’s 25th anniversary marks a milestone of growth and innovation through uncertainty, a theme that continues to define its present and future. Over the next 25 years, Moonstone aims to build on this legacy, leveraging its expertise to drive client success and shape a more robust, ethical financial services industry in South Africa.
