FSCA: Integrated Annual Report 2023/2024

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FSCA: Integrated Annual Report 2023/2024

• 16 October 2024
• Regulatory Compliance and Legislation
• South African Accounting Academy

Summary:

The Financial Sector Conduct Authority (FSCA) has published their Integrated Report 2023/2024, which confims that they have ramped up enforcement actions, imposing nearly R943 million in administrative penalties (on 31 people) for non-compliance during the 2023/24 financial year, up from R100 million (placed on 44 people) the previous year.

Article:

The aim of this report is to communicate to their stakeholders how they create, preserve or erode value over the short, medium and long term. This report covers their leadership overviews, operational overview, their strategic performance, their governance accountability, and their financial performance. The FSCA aim to provide their stakeholders with a focused and balanced report that demonstrates our integrated thinking.

The increase in penalties comes as South Africa strives to meet the Financial Action Task Force's (FATF) requirements to get off the 'grey list.' Similarly, the Financial Intelligence Centre (FIC) also highlighted that compliance levels in non-financial sectors remain inadequate.

Harsh Sanctions for Non-compliance

Non-compliance within the financial sector is being met with harsh sanctions as the FSCA strives to protect the integrity of South Africa's financial system. Some of the key reasons for the penalties include failure to adhere to anti-money laundering (AML) regulations, inadequate counter-terrorism financing measures, and insufficient risk management practices by financial institutions. During the 2023/24 period, the FSCA finalized 418 investigations, suspended 1,061 financial services provider licenses, and debarred 156 individuals for regulatory infractions.

The FIC noted poor submission rates for risk and compliance returns (RCRs) among legal practitioners, estate agents, trust service providers, and company service providers. This lack of compliance, especially in high-risk sectors, has been identified as a significant hindrance to South Africa's progress in demonstrating effective risk identification and mitigation, as required by the FATF. The FIC issued administrative sanctions to many accountable institutions that failed to submit RCRs.

Compliance is Key

For accountants, ensuring your clients' adherence to financial regulations is crucial to avoid significant fines and enforcement actions. The FSCA’s intensified crackdown serves as a reminder of the importance of robust compliance programs, particularly regarding AML obligations and risk management. Accountants play a proactive role in assisting clients to understand and fulfill these regulatory responsibilities, as failures could expose them to substantial penalties and further jeopardise South Africa’s standing on the international stage.

Contents of the Integrated Report:

• Part A.    About this Report
• Part B.    Introductions
• Part C.    About the FSCA
• Part D.    How we Create Value
• Part E.    How we Sustain Value
• Part F.    Our Performance
• Part G.    Value Creating Governance
• Part H.    Annual Financial Statements
• Part I.    PFMA Compliance Report
• Part J.    Annual Performance Report
• Part K.    Administration

Click here to download the 180-page Integrated Report:

https://www.fsca.co.za/Annual%20Reports/FSCA%20Integrated%20Report%202023-24.pdf

Relevance to Auditors, Independent Reviewers & Accountants:

• All the Acts regulated by the FSCA are pieces of legislation that your clients must comply with, and which you must assess compliance with.  If they don’t comply with the relevant laws and regulations, you have certain reporting obligations in terms of NOCLAR (NOn-Compliance with Laws And Regulations) – this could include reporting to management, qualifying your audit opinion, reporting a Reportable Irregularity, etc.
• As an auditor, independent reviewer and accountant, you should be aware of the regulatory actions and outcomes of the FSCA.
• You also need to consider the latest publications by regulators, such as the FSCA, to keep abreast of changes and important information.

Relevance to Your Clients:

• Entities that must comply with the relevant legislation that is enforced by the FSCA, should be aware of the regulatory actions and outcomes.
• Your clients also need to consider the latest publications by regulators, such as the FSCA, to keep abreast of changes and important information.

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