Financial Crime World

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Enforcement of Banking Laws and Regulations

The regulatory authorities in South Africa have various mechanisms in place to enforce banking laws and regulations. In this section, we will explore how they ensure compliance with the Banks Act, FSR Act, and other relevant legislation.

Approval of Auditors

The Prudential Authority is responsible for approving the appointment of auditors by banks or controlling companies. The authority may refuse an application or withdraw approval if:

  • The auditor has been convicted of an offence involving dishonesty.
  • The auditor is found to be incompetent or unfit to perform their duties.
  • The auditor is under investigation by the Independent Regulatory Board for Auditors.
  • The auditor fails to disclose any direct or indirect interests that may constitute a conflict of interest.

Cancellation or Suspension of Registration

The Prudential Authority has the power to cancel or suspend the registration of a bank if it fails to comply with prescribed conditions or further conditions determined by the authority. The authority may also institute court proceedings for an order cancelling or suspending registration if other grounds exist.

Administrative Penalties

Under the FSR Act, financial sector regulators have the power to impose administrative penalties on financial institutions, including:

  • Issuing directives
  • Imposing fines
  • Ordering the payment of costs
  • Censuring or reprimanding a financial institution

Regulators may also apply to a court for an order that a financial institution be wound up if it is unable to pay its debts or if it would be just and equitable to do so.

Power of the FSB

The FSB has the power to impose administrative penalties on firms or individuals for contravening any provision of the FSR Act or FAIS Act, including:

  • Issuing directives
  • Imposing fines
  • Ordering the payment of costs
  • Censuring or reprimanding

The FSB may also apply to a court for an order that a firm or individual be prohibited from carrying on business as a financial services provider.

Offences under the Banks Act

A bank is guilty of an offence if it fails to comply with any provision of the Banks Act or regulations made thereunder. Any person who knowingly aids, abets, counsels, induces or procures another person to commit an offence under the Banks Act may also be liable for that offence.

Penalties for Offences

The maximum penalty for an individual who commits an offence in terms of the Banks Act is a fine of R5 million or imprisonment for a period not exceeding 10 years, or both. If the act is committed by a juristic person, the maximum penalty is a fine of R50 million.

Under the FSR Act, any person who intentionally or recklessly contravenes any provision may be liable on conviction to a fine not exceeding R1 million or imprisonment for a period not exceeding 5 years, or both.

Conclusion

The regulatory authorities in South Africa have various mechanisms in place to enforce banking laws and regulations. These include approval of auditors, cancellation or suspension of registration, administrative penalties, and power to impose fines and costs orders. The maximum penalty for an individual who commits an offence under the Banks Act is a fine of R5 million or imprisonment for a period not exceeding 10 years, or both. If the act is committed by a juristic person, the maximum penalty is a fine of R50 million.