Autumn is definitely in the air, which usually means that the legislative environment is fairly settled, and we should be assessing our progress in meeting any new requirements or running projects.
However, this year is proving to be challenging; what with South Africa’s grey listing, declining economic performance, loadshedding, and now international bank failures – we recommend that organisations get ahead of the current legislative requirements if they can as it’s very likely we’ll see expanded and further legislation given these events.
THE FINANCIAL SECTOR CONDUCT AUTHORITY (THE FSCA)
Increase in potential penalties on insurers
The FSCA released Government Notices 3078 and 3079 on 24 February. Both increase the penalty for failure to submit returns by insurers to R7,750 per day.
(The very next request was for a return regarding personal lines claims information from insurers… Ed.)
Draft amendment to Collective Investment Schemes (CIS) portfolio structures
The FSCA released Communication 8 of 2023, as well as the necessary comment and working papers. The intention is to give CIS managers some leeway in their portfolio structures prior to the final changes to Board Notice 90 of 2014.
Should the interim change be approved, CIS managers will be able to include actively managed exchange traded funds as well as hedge funds (subject to Pension Funds Act Regulation 28) in their portfolios, and increase the current 20% allowed maxim exposure where the underlying portfolio is a foreign investment scheme to 45%. This would seemingly grant investors some offshore exposure without actually moving their funds there.
Comments are due by 21 April 2023, and can be submitted to FSCA.RFDstandards@fsca.co.za.
Crypto Asset Provider (CASP) Licensing
Don’t forget that the start date for applications for CASPs is looming. Applications can be submitted between 1 June and 30 November 2023.
We have already started assisting entities with their applications, and can see that there are definitely going to be some differences in the licensing and application requirements. It may be a case that the application forms are only made available just before the submission date, but we’re able to guide you to a suitable point based on the current process. Please get in touch if you need help.
FSCA Annual Report
The FSCA released its annual report for the 2021/2022 financial year earlier this month.
It’s a lengthy read, so before you rush to the bottom to see how much the FSCA executives earn, have a look at some of the initiatives and the plans for this year – as the Conduct of Financial Institutions (COFI) Bill is still high on the list and the FSCA has been drafted into the team to sort out the Financial Action Task Force (FATF) ‘grey listing’.
On reading the report, the strangest statistic we found was that the FSCA conducted supervisory activities on the financial statements of 88% of the financial service providers that submitted them. That does not coincide with our experience, as it seems implausible that this proportion of the industry has issues with its solvency and liquidity (maybe if you’re reading this, you’re part of the well behaved bunch – Ed.).
PRUDENTIAL AUTHORITY (PA)
Planned Surveys and Questionnaires
The PA released a list of surveys and questionnaires that it is planning to request the regulated institutions to submit during 2023.
There are 14 planned reports across all areas of the financial services industry, but the PA does note that it may make further requests depending on the responses or as situations arise.
As much as this allows some degree of planning, the details of the submissions may be quite technical, so it is definitely advisable to review the list.
FINANCIAL INTELLIGENCE CENTRE (FIC)
Accountable Institutions licensing
The FIC reminded newly included accountable institutions of their need to register. The FIC is aware that the deadline initially set has passed, but is still encouraging registration and seem to imply that no regulatory action will be taken should entities make an effort.
The original Government Gazette is available here, or you can double check our Legislative Update for a more concise explanation.
More from the FATF
As a member country of the FATF, the FIC provided details of other issues that members need to address.
This included improving access to Beneficial Owner information, improved control of crypto assets and providers, as well as a review of money laundering through and terrorist financing in the art and antiquities markets.
We can expect amended Beneficial Ownership requirements guidance to take effect in April this year, and the guidance on crypto assets to roll out in 2024, which will greatly assist in the applications for licences.
The art and antiquities report is available here, and details good practices followed by countries that have already considered this risk.
Jurisdictions under increased monitoring
As we know, South Africa has been added to the FATF “grey list” in February. The other countries added are Albania, Barbados, Burkina Faso, Cayman Islands, Democratic Republic of the Congo, Gibraltar, Haiti, Jamaica, Jordan, Mali, Mozambique, Nigeria, Panama, Philippines, Senegal, South Sudan, Syria, Tanzania, Türkiye, Uganda, United Arab Emirates, and Yemen.
Some lovely holiday venues, but not a club we really want to be part of to be honest.
The FATF also place the following entities on the high-risk jurisdictions list: Democratic Republic of Korea, Iran, and Myanmar.
The changes will necessitate another adjustment to the Risk Management and Compliance Plans of Accountable Institutions.
SAMLIT Report on Human Trafficking
The FIC, as part of its involvement with the South African Anti-Money Laundering (AML) Task Force, and in partnership with Refinitiv, released a report on modern slavery and human trafficking. The report, entitled “Follow the Money”, was released on 10 March 2023.
The report serves as a reminder of the human face of victims of money laundering and related crimes. To read that South Africa is one of the hubs for human trafficking is sad and sobering. Ensuring that companies develop and adhere to their AML guidelines will have an effect on addressing this terrible activity as this will directly affect the financial flows.
COUNCIL FOR MEDICAL SCHEMES (CMS)
The CMS adjusted the maximum fee payable to brokers on 24 February. The revised maximum amount is R111.18, and is effective from 1 January 2023.
To receive commission at this level given the time, effort, and compliance issues involved, it’s a wonder there are any brokers involved in medical aid!
NATIONAL TREASURY
International Monetary Fund (IMF) consultation on South Africa
The IMF released its concluding statement after its recent mission to South Africa.
We’ve read most of it before: South Africa has a strong and diversified economy, hampered by our position as an emerging economy, but mostly our issue is that we do not ‘walk the walk’ when it comes to governance.
It is noted that the South African government is making progress in some areas, albeit slowly.
