Grahamstown-headquartered bank GBS Mutual has been slapped with a R500000 fine after the SA Reserve Bank (SARB) found “weaknesses” in its controls intended to combat money laundering and financing of terrorism.
The SARB imposed the “administrative sanction” after a routine inspection under the Financial Intelligence Centre Act (Fica) to check if banks have the appropriate measures in place.
There was no suggestion that GBS had facilitated transactions involving money laundering or the finance of terrorism, the SARB said.
GBS has accepted the sanction, the bank said, and has already accounted for the fine in its annual financial statements for the year ended March 31 which were approved at the annual general meeting in July.
SARB has imposed stiff penalties on other banks for similar lapses.
Investec was fined R20-million, Standard Chartered SA R10-million, Bank of Athens R3-million and Habib Overseas Bank R1-million.
A key aspect of the Fica requirements is the bank’s “know-your-customer” processes. The act also requires banks to report cash transactions of more than R25000 to the Financial Intelligence Centre, a failing of Standard Charter’s Johannesburg branch.
All the banks moved to distance themselves from money laundering or financing terrorism.
GBS operations general manager Jonty Fincham acknowledged that while the bank was a small institution and “our clients are well known to us, we understand that we must be more formal in the way we do certain things”.
Fincham said the bank had moved to strengthen its customer identification and verification processes including information technology. Staff training had been intensified and a fulltime compliance officer had been appointed.
The result was that the bank’s “processes are much more robust”.
“As per the SARB announcement, there is no suggestion we were involved in money laundering or the funding
Fincham said the penalty provision had not affected profitability.
GBS managing director Anton Vorster said the bank was addressing identified compliance deficiencies and control weaknesses, “and has undertaken to remediate the shortcomings within the agreed timeframes”.
GBS Bank was formerly the Grahamstown Building Society, established in 1877. Today the bank has assets of R1-billion. As a mutual bank, it relies on client deposits, which makes it a net investor into the interbank market where banks borrow from each other, mostly for short terms.
Depositors also share in the bank’s profits.