The Prudential Authority of the South African Reserve Bank has imposed an administrative sanction of R10 million on the South Africa branch of State Bank of India for non-compliance with the Financial Intelligence Centre Act. The PA announced the enforcement action on 2 August 2024, noting that the sanctions comprised a reprimand, four cautions and financial penalties totalling R10 million, of which R4.5 million has been conditionally suspended for 36 months, leaving an immediate effective fine of R5.5 million payable by the branch. The sanctions followed an inspection of the branch conducted in May 2020.

The PA found that the branch had failed to conduct customer due diligence properly, failed to file cash threshold reports or file them on time, maintained an inadequately documented money laundering and terrorist financing risk assessment and an RMCP that did not document its governance structures, operated a transaction monitoring system with ineffective rules, and failed to ensure broader compliance with the Act. The RMCP, or Risk Management and Compliance Programme, is the structured framework that each accountable institution is required to maintain under the FIC Act. The inspection of SBI South Africa's branch was conducted under Section 45B of the FIC Act, which provides the PA with the authority to examine the compliance systems of any institution regulated under that legislation.

PENALTY BREAKDOWN

The largest penalty, R5 million (R3 million suspended), related to customer due diligence failures, while the risk-assessment, RMCP and transaction-monitoring failures drew R4 million (R1.5 million suspended) and the compliance-oversight failure R1 million.

State Bank of India's South Africa branch is a foreign bank branch operating in Johannesburg, structured as a direct extension of the Indian state-owned parent bank rather than as a locally incorporated subsidiary.

SANCTIONS NOT LINKED TO LAUNDERING TRANSACTIONS The PA stressed that the sanctions were not imposed because of any involvement in, or facilitation of, money laundering or terrorist financing transactions.

The suspended R4.5 million may be activated if SBI South Africa fails to meet the conditions attached to the deferral or commits further regulatory breaches during the 36-month suspension period. The SARB published the details of the action on its website. The PA said SBI had co-operated with it and had undertaken remedial action to address the deficiencies identified.