Sanlam Collective Investments (SCI), a subsidiary of South Africa’s largest insurer, Sanlam Ltd, has been hit with a R10.6 million administrative penalty by the Financial Sector Conduct Authority (FSCA) for multiple breaches of the Financial Intelligence Centre Act (FIC Act). The fine follows a March 2024 inspection that uncovered significant compliance failures, raising concerns about the robustness of SCI’s anti-money laundering (AML) and counter-terrorism financing controls.
Key Findings from the FSCA Inspection
The FSCA’s inspection revealed that SCI had not effectively implemented its Risk Management and Compliance Programme (RMCP), a critical requirement under Sections 42(1) and (2) of the FIC Act. Although SCI had developed an RMCP, it failed to apply it adequately, particularly in the risk rating of clients. The programme was also found to be technically deficient, lacking comprehensive procedures in several key areas:
- Enhanced due diligence for partnerships (Section 42(2)(f))
- Monitoring complex or unusually large transactions (Section 42(2)(h))
- Termination of business relationships (Section 42(2)(k))
- Identification and reporting of suspicious transactions (Sections 42(2)(o) and (p))
- Justification for excluding certain Section 42(2) requirements
In addition, SCI breached multiple client due diligence obligations under Sections 20A, 21, 21A–21H of the FIC Act. These sections mandate the identification and verification of clients and their beneficial owners, as well as ongoing and enhanced due diligence, particularly for politically exposed persons (PEPs). The FSCA found that SCI had failed to meet these standards, leaving gaps in its AML framework.
Previous Compliance Issues and Sanctions
This is not SCI’s first run-in with regulatory authorities. The FSCA considered SCI’s history of non-compliance when determining the severity of the penalty. Past infractions include an enforceable undertaking under Section 151 of the Financial Sector Regulation Act and a previous breach of Section 4(4)(a) of the Collective Investment Schemes Control Act (CISCA), which also resulted in a financial penalty.
Sanctions and Remedial Measures
The FSCA imposed a R10.6 million fine, of which R3.6 million has been conditionally suspended for two years. This suspension is contingent upon SCI fully addressing the identified deficiencies and maintaining consistent compliance with the FIC Act during the suspension period.
In its statement, the FSCA emphasized the gravity of the breaches, citing SCI’s substantial market presence and the systemic risks posed by inadequate AML controls. “An effective RMCP is essential not only for protecting institutions from financial crime but also for safeguarding the integrity of the broader South African financial system,” the regulator stated.
Sanlam’s Response
Sanlam acknowledged the FSCA’s findings and confirmed its cooperation throughout the investigation. The company emphasized that the breaches were administrative in nature and not indicative of deliberate misconduct. It has committed to implementing remedial actions to strengthen its compliance framework and prevent future lapses.
Implications for the Financial Sector
This enforcement action sends a clear message to South Africa’s financial institutions: regulatory compliance is non-negotiable. The FSCA reiterated that institutions operating within large, international financial services groups are expected to demonstrate heightened vigilance in combating financial crime. The sanction against SCI underscores the regulator’s zero-tolerance stance on non-compliance and its commitment to maintaining the integrity of the financial system.
