There were articles in the media about the fine Momentum received from the Financial Sector Conduct Authority (FSCA) “for inadequate controls against financial crime”. Media coverage was based on a press release from the FSCA. Please refer to this document for more background and assurance that we are serious about the role we play in curbing financial crime. We have already made the necessary adjustments to our processes to ensure compliance.
Note that the FSCA did not find that Momentum in any way facilitated transactions involving money laundering or terrorist financing. The fine was imposed because they found that the protective measures Momentum Wealth and Momentum Collective Investments had in place against money laundering, did not effectively comply with the provisions of the Financial Intelligence Centre Act. We have already taken the required action to make sure that the identified weaknesses are rectified.
Although we are of the opinion that the fines are high relative to the nature of the non-compliance, we have decided to settle this matter amicably with the FSCA. Our acceptance and payment of the penalties reflect our commitment to ensure compliance with the relevant regulatory requirements and our willingness to address any potential non-compliance issues.
In May 2020, as part of standard practice, the FSCA conducted an on-site inspection on Momentum Collective Investments (MCI) and Momentum Wealth, focusing on the FIC Act of 2017.
The FSCA identified 38 clients that were not risk-rated as stipulated in our Risk Management Compliance Programme (RMCP). The 38 clients were existing clients of MCI before the FIC Amendment Act of 2017 came into effect. MCI's RMCP provides for these existing clients to be risk rated and subjected to an on-going customer due diligence process as part of a remediation plan to eventually ensure that they are risk rated in terms of FICA. In this respect, MCI's RMCP provided for the remediation plan for existing clients to continue for 12 to 24 months after 1 April 2019. The FSCA, however, did not agree with our approach as stipulated in our RMCP and awarded MCI a penalty of R1.9 million.
We can confirm that we have since reviewed our processes and made sure that we strictly adhere to the FSCA’s requirements.
MCI has identified and self-reported on historic non-compliance in terms of the Cash Threshold Reporting requirements where 400 transactions out of a total of more than 236 000 new business and ad-hoc transactions were not reported for the period 2010 to 2018. The FSCA has issued a penalty of R4,4 million against MCI for this historic non-compliance. We have implemented corrective action to ensure all cash transactions are timeously reported to the regulator.
Momentum Wealth has identified and self-reported on historic non-compliance in terms of the Cash Threshold Reporting requirements for the period 2010 to 2017. We have processed more than 260 000 new business and ad-hoc transaction during this period, but unfortunately did not report on 305 cash transactions. The FSCA issued a penalty of R4,8 million against Momentum Wealth for this historic non-compliance. We have also implemented corrective action here to ensure all cash transactions are timeously reported to the regulator.
Momentum Wealth also failed to identify, verify, and risk rate one beneficiary of a trust and was fined R100 000, which was suspended for three years.