Financial Crime World

SOUTH AFRICA: BANKING COMPLIANCE PROCEDURES INTRODUCED BY FSCA TO ENSURE FAIR TREATMENT OF CUSTOMERS

The Financial Sector Conduct Authority (FSCA) has introduced the Conduct Standard for Banks, a regulatory framework aimed at supervising market conduct in the banking sector and ensuring fair treatment of customers.

Key Provisions of the Conduct Standard

  • Culture, Governance, and Oversight: Banks must demonstrate how fair treatment of customers is central to their culture, governance, and oversight mechanisms.
  • Business Integrity: Banks must conduct business with integrity, honesty, due care, skill, and diligence while avoiding conflicts of interest and cooperating openly with the FSCA.
  • Financial Products and Services: Banks must ensure that financial products and services are designed to meet the needs of identified customer groups and are targeted at these groups.
  • Information Provision: Banks must provide clear information and keep customers appropriately informed before, during, and after point of sale.
  • Complaints Management Framework: Banks must have a complaints management framework in place.

Treating Customers Fairly (TCF) Outcomes

The Conduct Standard establishes six TCF Outcomes:

TCF Outcome 1: Central to Culture

  • Customers are confident that they are dealing with financial institutions in which the fair treatment of customers is central to their culture.

TCF Outcome 2: Product Design and Targeting

  • Products and services marketed and sold in the retail market are designed to meet the needs of identified customer groups and are targeted at these customer groups.

TCF Outcome 3: Clear Information Provision

  • Customers are provided with clear information and kept appropriately informed before, during, and after point of sale.

TCF Outcome 4: Suitable Advice

  • Where advice is given, it is suitable and takes account of customer circumstances.

TCF Outcome 5: Product Performance and Service Standards

  • Products perform as firms have led customers to expect, and service is of an acceptable standard as they have been led to expect.

TCF Outcome 6: Post-Sale Flexibility

  • Customers do not face unreasonable post-sale barriers imposed by firms to change products, switch providers, submit a claim or make a complaint.

Implementation and Enforcement

The FSCA will engage with banks to remedy situations where negative outcomes for customers are identifiable and seek redress where necessary. The Conduct Standard is expected to lead to improved outcomes for customers with an emphasis on transparency and disclosure relating to the offering of financial products and services targeted to appropriate customer groups.

Upcoming Webinar

Banks will need to assess the potential cost implications that may arise in implementing this Conduct Standard. We will be unpacking the provisions of the Conduct Standard in greater detail at an upcoming webinar on TUE 21 JUL 2020 at 11am and exploring the impact of the Conduct Standard on the banking sector in terms of advertising, liability for distribution networks, product design, customer complaints, and the termination or switching of financial products.