Two divisions of JSE-listed financial services group Momentum have received a fine totalling R11.2 million from the Financial Sector Conduct Authority (FSCA) for “weaknesses” in control measures around money laundering and terrorist financing.
The financial watchdog confirmed in a statement on Thursday that it had imposed “administrative sanctions” on Momentum Wealth and Momentum Collective Investments (MCI) and has issued a directive for the entities to take the necessary remedial actions.
The weaknesses in financial controls were discovered following an inspection conducted in terms of the Financial Intelligence Centre (FIC) Act, according to the FSCA.
Duties and obligations
“The FIC Act imposes certain duties and obligations on institutions who may be used for money laundering purposes and the financing of terrorist and related activities. The FIC Act, in terms of Section 45, mandates the FSCA to supervise and enforce compliance,” the regulator pointed out.
“Flowing from these responsibilities, the FSCA … inspects accountable institutions to assess whether they have appropriate and adequate anti-money laundering and countering of terrorist financing controls and measures in place that would enable them to effectively mitigate the risks of money laundering and terrorist financing and to comply with the provisions of the FIC Act,” it said.
The FSCA added that the administrative sanctions imposed on Momentum Wealth and MCI totalled R11.1 million in light of the seriousness of the non-compliance. This excludes an amount of R100 000, which it noted was “suspended for three years”.
The watchdog specifically pointed out that the two entities are part of Momentum Group.
The FSCA, however, stressed that “the administrative sanctions were imposed as a result of weaknesses identified in Momentum Wealth and MCI’s money laundering/terrorist financing controls, and not because the entities were found to have facilitated transactions involving money laundering/terrorist financing”.
It added: “The measures in place were found to not effectively comply with the provisions of the FIC Act.”
The FSCA said Momentum Wealth and MCI “have duly cooperated” – noting that both entities “have already started to remediate the identified compliance deficiencies and control weaknesses”.
“With these sanctions the FSCA wants to send a strong message to all institutions regulated by it that non-compliance with the FIC Act will not be tolerated, and that harsh sanctions will be imposed,” it declared.
In a statement of assurance to the market on Friday following the FSCA’s announcement and fine, Daleen Lessing chief risk officer at Momentum Investments, said the group is serious about the role it plays in curbing financial crime.
“We have already made the necessary adjustments to our processes to ensure compliance,” she noted.
Lessing pointed out that the FSCA did not find that Momentum in any way facilitated transactions involving money laundering or terrorist financing.
“The fine was imposed because they found that the protective measures Momentum Wealth and Momentum Collective Investments had in place against money laundering, did not effectively comply with the provisions of the FIC Act. We have already taken the required action to make sure that the identified weaknesses are rectified,” she added.
“Although we are of the opinion that the fines are high relative to the nature of the non-compliance, we have decided to settle this matter amicably with the FSCA,” said Lessing.
“Our acceptance and payment of the penalties reflect our commitment to ensure compliance with the relevant regulatory requirements and our willingness to address any potential non-compliance issues.”