File Picture: REUTERS
File Picture: REUTERS

In 2017, the South African Reserve Bank fined two banks a combined R77.5m owing to their failure to comply with the Financial Intelligence Centre (FIC) Act.

According to the annual report by the bank supervision department, released on Tuesday, the central bank fined the China Construction Bank and VBS Mutual Bank for failing to identify and verify customers’ details. The two institutions were also penalised for failing to report certain cash transactions above R24,999.99 and for not having proper controls and working methods when it came to the reporting of suspicious transactions.

The Johannesburg branch of the China Construction Bank received the brunt of the fine of R75m, with R20m being suspended for a period of three years.

The Venda-based VBS bank was fined R2.5m, of which R2m was suspended for a year. VBS bank is the same bank that granted former president Jacob Zuma a R7.9m loan for his Nkandla home. The bank is presently in curatorship.

The report said the two banks were directed to take "remedial action" to address the "identified deficiencies".

However, the report emphasised that the sanctions were not based on any evidence that China Construction Bank’s Johannesburg branch or VBS Bank had "facilitated transactions relating to money laundering and/or the financing of terrorism".

The reserve bank said that in the future, the Prudential Authority, a body formed under the Twin Peaks model, would be responsible for supervising and enforcing compliance with the FIC Act.

"While, in general, SA has a modern and prudent financial sector that has the interests of all customers and citizens at heart, there are too many cases of abuse and exploitation in the sector, and the risks that the sector poses to the economy is still immense. Effective regulation will help make the financial sector more responsive to the needs of all South Africans," the bank said in a statement.