SA Reserve Bank fines Grindrod Bank R10.73m for FICA non-compliance

The South African Reserve Bank (SARB) has imposed administrative sanctions, including an effective fine of R5.73 million, on Grindrod Bank Limited because of its non-compliance with the Financial Intelligence Centre Act (FICA), following an inspection in 2020.

The administrative sanctions included reprimands, cautions, and a fine totalling R10.73m, of which R5m was conditionally suspended for 24 months from 13 July 2023, the SARB said in a statement this month.

Grindrod Bank co-operated with the Prudential Authority (PA) and undertook the necessary remedial action to address the identified compliance deficiencies and control weaknesses, the statement said.

The sanctions were not imposed because Grindrod Bank was found to have been involved in or facilitated transactions involving money laundering or the financing of terrorism.

The PA is mandated to supervise and enforce compliance with the provisions of FICA of the accountable institutions it supervises. The PA inspects accountable institutions to assess whether they have appropriate and adequate anti-money laundering and counter-financing of terrorism measures and controls that will enable them to comply with FICA.

The SARB said the sanctions stemmed from the following non-compliance:

1. Grindrod Bank did not comply with its Risk Management and Compliance Programme (RMCP) obligations in terms of sections 42(1), 42(2) and 42(2A) of FICA because it failed to:

• document and implement customer due diligence (CDD) requirements for the bank’s customers, shared clients, and customers onboarded by an agent in accordance with FICA;
• document and implement the identification and verification of ultimate beneficial owners in accordance with FICA for all customers, including in instances of elevated money laundering and terrorist financing (ML/TF) risks;
• document the rationale and calibrate the bank’s client ML/TF risk scoring model in line with its risk profile; and
• apply Grindrod Bank’s RMCP processes and procedures independently to assess, understand, and monitor the ML/TF risks in relation to the bank’s shared clients and underlying clients of agent relationships.

The PA imposed a reprimand and a fine of R1.5m, of which R900 000 was conditionally suspended for 24 months from 13 July 2023.

2. Grindrod Bank failed to comply with aspects of its CDD and enhanced due diligence obligations in terms of sections 21 to 21H of FICA based on sampled customer relationships.

The PA imposed a caution not to repeat the conduct that led to the non-compliance and a fine of R4m, of which R2m was conditionally suspended for 24 months.

3. Grindrod Bank failed to comply with its record-keeping obligations in terms of sections 22 to 24 of FICA based on sampled (terminated) customer relationships.

The PA imposed a caution not to repeat the conduct that led to the non-compliance, a reprimand, and a fine of R5m, of which R2m was conditionally suspended for 24 months from 13 July 2023.

4. Grindrod Bank failed to comply with section 42 of FICA and Financial Intelligence Centre Directive 5 of 2019 in that the bank’s automated transaction monitoring system rules did not effectively monitor and generate alerts on unusual and potentially suspicious activity through scenarios (peer profiling) and threshold values and amounts reasonably designed to detect potential ML/TF. The bank also inappropriately placed reliance on a third party to conduct ongoing monitoring of its shared client relationships.

The PA imposed a caution not to repeat the conduct that led to the non-compliance and a reprimand.

5. Grindrod Bank failed to comply with its governance obligations in terms of sections 42A(2), 42A(3), and 42(1) of FICA, specific to:

• adherence to the bank’s documented CDD-related processes and controls;
• record-keeping associated with suspicious transaction reports/suspicious activity reports filed with the Financial Intelligence Centre;
• closed terrorist property reporting alerts within required timeframes;
• detection and identification of domestic prominent influential person and foreign prominent public officials, including family members and known close associates;
• remediation of documented deficiencies specific to the bank’s reliance on a third-party accountable institution to perform certain FICA obligations; and
• oversight of agent relationships in line with the bank’s risk acceptance and appetite and its RMCP documented processes.

The PA imposed a reprimand and a fine of R230 000, of which R100 000 was conditionally suspended for 24 months from 13 July 2023.