Following a routine inspection between 17 October and 15 November 2022, the Financial Sector Conduct Authority (FSCA) identified several shortcomings on the part of Ashburton, a wholly owned subsidiary of the FirstRand group that had about R140-billion in assets under management in January this year.

The firm was found to be in breach of the Financial Intelligence Centre (FIC) Act by failing to identify and verify the identity of some clients, including beneficial owners of clients.

Although Ashburton did develop a risk management and compliance programme, this did not set out how it would comply with the FIC Act when it comes to:

• Examining complex or unusually large transactions and unusual patterns of transactions;
• Performing customer due diligence when, during the course of a business relationship Ashburton suspects that a transaction of activity is suspicious or unusual;
• Terminating existing business relationships;
• Enabling Ashburton to determine when a transaction or activity is reportable to the FIC; and
• Implementation of the risk management and compliance programme.

At the time of the inspection, Ashburton also failed to screen its clients, including beneficial owners, against the Targeted Financial Sanctions lists.

In a response to Daily Maverick’s queries, Ashburton said it has already started a remediation programme to address these shortcomings, and the first key milestones have been met. 

“This programme includes enhancements to Ashburton’s financial crime policies and frameworks, as well as improvements to its client due diligence and screening processes,” it notes, adding that the FSCA did not find any evidence that Ashburton facilitated any transactions involving terrorist financing or money laundering. 

“Ashburton’s clients’ funds and investments are not affected by this in any way. We fully support the FIC Act and believe that a robust regulatory environment is crucial to protect our industry, considering South Africa’s greylisting,” says Duzi Ndlovu, chief executive of Ashburton Investments.

The FSCA says it views these transgressions as serious violations of the FIC Act, particularly in light of the nature, size, complexity and potential risk exposure of AFM’s business. 

“The requirement to understand and mitigate money laundering and terrorist financing risks through the implementation of a risk management and compliance programme is vital not only because it assists accountable institutions to protect and maintain the integrity of their own businesses, but also because it helps contribute to the integrity of the South African financial system as a whole. Proper customer due diligence and screening of clients is also crucial to help identify and mitigate against suspicious and criminal elements from infiltrating the financial system. This makes it especially important for institutions that operate as part of large financial services groups to demonstrate an elevated level of vigilance when managing their financial crime risks,” the regulatory authority said.

In recognition of the remedial action already taken to date by AFM, the FSCA has agreed to suspend R6-million of the total imposed penalty for three years, on condition that AFM fully complies with a directive to remediate the remaining deficiencies.

Ashburton has already paid R10-million of the total penalty, which was due by 28 February. 

“The sanction imposed serves as a strong reminder that non-compliance with the FIC Act will not be tolerated. All accountable institutions are urged to continue reviewing and strengthening their anti-money laundering and terrorist financing risk and control environments. Failure to do so will result in firm regulatory action,” the FSCA warned. DM