Capitec Faces Severe Penalties Over Anti-Money Laundering Breaches

Capitec Bank, South Africa’s rapidly growing JSE-listed bank, has been fined R56.25 million by the South African Reserve Bank (SARB) for non-compliance with anti-money laundering regulations. The announcement was made recently on SARB’s website, pointing out that R10.5 million of the penalty is conditionally suspended for the next 36 months, starting from July 30, 2024.

This financial penalty results from an extensive investigation covering inspections from 2021 and 2022, focusing separately on the retail and business banking segments of Capitec. These inspections were part of the Prudential Authority's (PA) standard supervisory processes under the Financial Intelligence Centre Act (FICA), assessing Capitec's adherence to customer due diligence and related obligations from 2017 to 2022.

Capitec’s shortcomings included inadequate customer due diligence, insufficient identification of beneficial ownership, and failures in timely reporting of cash threshold reports and suspicious transactions to the Financial Intelligence Centre (FIC). Additionally, lapses were noted in handling Automated Transaction Monitoring System alerts and aspects of its Risk Management and Compliance Programme.

Specifically, the penalties are arranged as follows:

- A caution and a financial penalty of R20 million (with R5 million conditionally suspended) were issued for the retail segment.

- The business banking segment faced a caution and a financial penalty of R15 million (with R2 million conditionally suspended).

- For other deficiencies including delayed suspicious transaction reporting, Capitec received additional financial penalties totaling R10 million across various segments.

In response to the sanctions, Capitec acknowledged the findings and cooperated fully with the PA during the inspection process. The bank is committed to addressing the compliance and control issues identified, ensuring better adherence to the FICA requirements.

SARB’s strict actions signify its intensified efforts to clamp down on financial malpractices amidst concerns to uplift South Africa's standing with the global anti-money laundering watchdog, the Financial Action Task Force. This case underscores the escalating scrutiny financial institutions are facing regarding compliance with regulatory frameworks. Capitec’s journey towards rectifying these breaches will be closely monitored by regulatory authorities and stakeholders in the coming months.