South Africa's Prudential Authority Fines Bank of China Johannesburg Branch R30.5 Million for FICA Violations

The Prudential Authority of the South African Reserve Bank has imposed a financial penalty of R30.5 million on the Johannesburg Branch of Bank of China for a series of violations of the Financial Intelligence Centre Act, in sanctions announced by the South African Reserve Bank in June 2024. The sanction follows a PA inspection of the branch conducted in 2021, which assessed data sampled from 2016 to 2020.

Of the total penalty, R15.25 million has been conditionally suspended for a period of 36 months calculated from 19 March 2024, meaning the Johannesburg Branch must avoid further regulatory breaches during that window to avoid the suspended portion of the fine being activated.

SCOPE OF THE FICA VIOLATIONS

The PA's investigation found that Bank of China's Johannesburg Branch had failed to comply with multiple provisions of the Financial Intelligence Centre Act. The violations included failures under Section 21(1) and Section 21A, which govern the requirements for customer due diligence and enhanced due diligence. These provisions require accountable institutions to identify and verify customers, understand the beneficial ownership of legal entities, and apply heightened scrutiny to relationships assessed as presenting higher risk of money laundering or financial crime.

Additional violations were identified under Section 29 read with regulation 24(3), which relates to the obligation to report suspicious and unusual transactions to the Financial Intelligence Centre.

The PA also cited non-compliance with FIC Act Directive 5 of 2019 and with Section 42, which requires accountable institutions to maintain a documented, operative, and risk-based risk management and compliance programme.

BACKGROUND

Bank of China is one of China's large state-owned commercial banks. As a licensed foreign bank branch, the Johannesburg Branch is subject to the full scope of South African banking regulation and financial crime obligations administered by the PA and the Financial Intelligence Centre.

South Africa has been strengthening its anti-money laundering and counter-terrorist financing frameworks in response to assessments by the Financial Action Task Force.