The Financial Sector Conduct Authority (the Authority) published the Consultation Paper: Exemption of Services under Supervision on 31 July 2018 for comments.
The purpose of the Consultation Paper relates to the Fit and Proper Requirements of a representative acting under supervision and the Authority’s proposed –
(a) withdrawal of the Notice on the Exemption of Services under Supervision in terms of Requirements and Conditions, 2008 (“2008 Exemption”); and
(b) replacement of the 2008 Exemption with the exemption set out in Annexure A to the Consultation Paper.
Interested parties are invited to submit written submissions to FAIS.Consultation@fsca.co.za before 31 August 2018.
To read the Consultation Paper, click here.
The Financial Sector Conduct Authority (the Authority) published the Exemption of Certain Representatives from Class of Business Training Requirements, 2018 (the Exemption) on 6 August 2018.
In terms of Section 29 of the Determination of Fit and Proper Requirements for Financial Services Providers, representatives must, prior to rendering any financial services, complete class of business training relevant to the financial products for which they are appointed. This requirement came into effect on 1 August 2018.
In terms of the Exemption, a representative who has a date of first appointment of 1 August 2018 or thereafter, or a specific representative (as defined therein) who is appointed for a Tier 1 product for the first time on or after 1 August 2018, has until 31 January 2019 to comply with class of business training requirements.
The purpose of the Exemption is to allow representatives appointed on or after 1 August 2018 to continue to render financial services under supervision whilst completing the relevant class of business training, pending the finalisation and publication of the Draft Services under Supervision Exemption.
To read the full Exemption, click here.
The Financial Sector Conduct Authority (FSCA), previously Financial Services Board (FSB), has the responsibility to supervise the compliance of financial institutions with financial sector laws. Where the FSCA finds that a financial institution is not compliant, it may take appropriate remedial and enforcement action. These actions could result in referral to the Enforcement Committee of the FSCA which can impose administrative penalties. Alternatively, it could apply to Court to place a financial institution under curatorship.
During 2017 the FSCA took action in 17 cases where it imposed administrative penalties. The total Rand value of enforcement actions for 2017 amount to R4.7 million. These enforcement actions ranged from the lowest penalty imposed being R10 000 to the highest penalty imposed being R 2 million together with the costs of the enquiry.
The most frequently contravened legislation for this period was the FAIS Act, the Financial Markets Act, the Policyholder Protection Rules (both Long Term and Short Term), CISCA, and the Securities Services Act. The percentage of enforcement actions per legislation contravened may be further detailed as set out below:
The above statistics are a harsh reality of what non-compliance could lead to. It is therefore imperative that financial institutions remain compliant in addition to displaying a willingness to comply. In the event of an enforcement action being ordered, persons aggrieved by decisions may apply to the Financial Services Tribunal established in terms of Section 219 of the Financial Sector Regulation Act 9 of 2017 (FSRA) for a decision to be reconsidered. However, we believe that prevention is key, as a reconsideration may not always work in your favour.
Should you require assistance with any compliance related matter, contact your regional Masthead office or email firstname.lastname@example.org.
The Financial Intelligence Centre (FIC) has the authority to reprimand institutions and can also impose penalties on institutions when they do not comply with regulation. If the FIC or a supervisory body finds that an accountable or reporting institution or any person with an obligation to comply with the Financial Intelligence Centre Act (Act) has not complied with the Act or with a directive issued in terms of the Act, an administrative sanction may be imposed. The sanction will generally be imposed by the supervisory body who has conducted the inspection.
Administrative sanctions may take a variety of forms – including, a caution, a reprimand and/or restricting the business activities of the institution and/or a financial penalty of up to R10 million for a natural person or up to R50 million for a legal person per instance of non-compliance.
The FIC recently published notices to motor dealerships for not complying with the regulations.
Registration with the FIC is a legal requirement applying to all accountable and reporting institutions – listed in Schedules 1 and 3 of the FIC Act, respectively. All registrations must be completed and submitted to the FIC electronically within the prescribed period using the goAML registration system. Persons who commence new businesses which are regarded as accountable or reporting institutions are required to register with the Centre within 90 days from the date the business commenced.
In terms of Section 45 of the Act, the FIC reprimanded JDG Trading (Pty) Ltd t/a Nissan Mthata, European Automotive Imports of South Africa (Pty) Ltd t/a Maserati, SMG Auto Cape Town (Pty) Ltd, Mystic Cars (Pty) Ltd as well as Gold Trader Mossel Bay (Pty) for failing to timeously register with the Centre.
Nissan Mthatha was also reprimanded for utilising the user profile of another institution to submit a report to the Centre. Directive 2 clearly stipulates that the login credentials obtained from the FIC may only be used by the person to whom such credentials have been allocated.
The FIC also reprimanded these businesses for failing to report in terms of Section 28 of the Act, which refers to the obligation of the accountable or reporting institution to report transactions where cash in excess of the prescribed amount, was paid or received. This means that all cash transactions exceeding R24 999.99 (being R25 000 or more) must be reported to the Centre in terms of Section 28 of the Act. An accountable or reporting institution that does not report a cash transaction as required, is guilty of an offence where the penalty may be imprisonment up to 15 years or a fine up to R100 million.
The Centre imposed the following penalties for failing to report on transactions that exceeded the threshold amount:
Financial penalties imposed by the FIC or supervisory body are paid into the National Revenue Fund Account. The money is used to provide financial assistance to law enforcement agencies or institutions that render assistance to victims of crime.
The Amendment Act has introduced the risk-based approach which allows an accountable institution to determine the level of money laundering and terrorist financing risk a business relationship or transaction poses and to apply the necessary Due Diligence requirements as described in the institution’s Risk Management and Compliance Programme (RMCP). Accountable institutions must develop and implement their own customised RMCP based on the money laundering risks applicable to their businesses by 2 April 2019.
Take some time to familiarise yourself with the requirements and to ensure that your business complies by completing the FICA Online Course on the Masthead Learning Centre.
Masthead can assist accountable institutions in developing and implementing a unique RMCP. Contact your Masthead compliance officer or regional office.
Click on the links below to read the detailed Administrative Sanctions imposed on each business:
With the introduction of the New Fit and Proper Requirements (Board Notice 194 of 2017), the requirement of a business continuity plan forms part of the governance framework that must be adopted and implemented by all FSPs.
It is therefore evident that a sound business continuity plan is essential to the operational ability, and ultimately, to the fit and proper requirements of any FSP.
The central theme of this plan is to outline or explain the ease of resuming “business as usual” in cases of material interruption, within predetermined timelines and the quality of the restored data to a state which it would have been should the incident not have occurred.
With more and more businesses moving from a paper-based approach of operating to a more digitised or paperless approach, there are now various methods adopted in the market. Cloud technology on CRM systems, for instance, allows one to interface with their businesses from anywhere at any given time and allows for backing up in real time.
According to the Financial Sector Conduct Authority (FSCA), the business continuity plan should at least exhibit the following qualities:
The elements therefore be considered when planning for business continuity are:
The lack of an adequate and documented business continuity plan means that an FSP is not meeting the fit and proper requirements of operational ability and therefore there are grounds for regulatory action. Whichever course of action the FSP plans to use to address business continuity in the event of death, lapsing of license or even retirement of the key individual, it needs to be documented and tested for suitability, acceptability and feasibility.
In terms of section 52(13) of the Determination of Fit and Proper Requirements for Financial Services Providers, 2017 (“Determination”), a person who is authorised, approved or appointed after 1 April 2018 but prior to 1 August 2018 has until 1 August 2019 to comply with the class of business training requirements set out in Part 5 of Chapter 3 of the Determination.
In terms of the Exemption, a person who, prior to 1 August 2018, has applied for –
(a) authorisation as a financial services provider; or
(b) approval as a key individual,
is exempted from the class of business training requirements until 1 August 2019.
The purpose of the Exemption is to extend the effect of section 52(13) to persons who have applied or who applies for authorisation as FSPs or approval as Key Individuals prior to 1 August 2018, for categories which they have not yet been approved for on their licence.