South Africa’s Financial Sector Conduct Authority (FSCA) has significantly ramped up efforts to clamp down on financial misconduct, issuing R900 million in fines and penalties over the past financial year, according to the agency’s latest annual report. This sharp rise in regulatory action is part of a broader initiative to address financial irregularities and to help the country exit the Financial Action Task Force’s (FATF) greylist.
Regulatory Crackdown Intensifies
The FSCA, tasked with overseeing South Africa’s financial services industry, reported a notable increase in its enforcement measures over the past year. Between 1 April 2023 and 31 March 2024, the FSCA imposed penalties totalling R943 million on 31 individuals, a staggering jump from the R100 million levied on 44 individuals the previous year.
One of the most significant penalties was imposed on Markus Jooste, the former CEO of Steinhoff International, who was fined R475 million following an investigation into his involvement in financial misconduct. Tragically, Jooste took his own life just a day after the fine was issued in March.
The report also highlighted that the FSCA had suspended the licenses of 1,061 financial service providers and debarred 156 individuals for dishonest conduct. Most of these cases were related to unauthorised financial advisory services and unregistered insurance businesses, both of which were key areas of concern.
“These actions demonstrate the FSCA’s commitment to rooting out misconduct and ensuring the integrity of South Africa’s financial services sector,” the report noted.
Crypto Licenses and New Regulations
A notable development during the financial year was the FSCA’s increasing focus on regulating cryptocurrency-related services. In June 2023, the authority officially recognised crypto assets as financial products under the Financial Advisory and Intermediary Services (FAIS) Act, introducing a new licensing regime for crypto asset service providers (CASPs).
The move marked a significant step towards formalising and regulating the previously unregulated cryptocurrency market in South Africa. The FSCA received 366 license applications from institutions involved in crypto-related financial services, with 138 licenses approved by the end of June 2024.
This licensing process, which began in June 2023, aims to eliminate the risk of scams and fraud that have plagued the burgeoning crypto industry. “By licensing them, the FSCA aims to eliminate scams,” the report stated.
Stepping Up to Exit the Greylist
The FSCA’s latest actions form part of a wider effort to remove South Africa from the FATF greylist. The country was greylisted in February 2023 for failing to comply with international standards aimed at preventing money laundering, terrorist financing, and the financing of weapons of mass destruction.
FSCA Commissioner Unathi Kamlana emphasised the institution’s increased collaboration with both international and domestic partners to combat financial crime. “This enhanced capacity has enabled more in-depth and frequent inspections, and we have issued several administrative sanctions related to breaches, demonstrating our commitment to work towards removing SA from the greylist,” Kamlana said.
The FSCA also expanded its anti-money laundering (AML) capabilities by appointing nine additional staff members, with plans to further boost its team to strengthen its supervisory oversight.
In its June 2024 report, the FATF acknowledged South Africa’s progress in addressing financial crime, including implementing and updating supervisory risk assessment tools. However, the organisation cautioned that more work remains to be done, with seven strategic deficiencies still requiring attention.
Looking Ahead
As South Africa continues to battle financial misconduct and work towards exiting the FATF greylist, the FSCA’s increased regulatory actions and enhanced collaboration with global authorities underscore its commitment to cleaning up the financial services industry. With significant fines and penalties issued, alongside new regulations for emerging sectors such as cryptocurrency, the country is taking meaningful steps to regain its international standing.
