Bank of Namibia Determination on the Imposition of Administrative Fines (BID-25)

N$4.00 WINDHOEK - 19 July 2013 No. 5244 GOVERNMENT GAZETTE OF THE REPUBLIC OF NAMIBIA CONTENTS Page GENERAL NOTICE No. 284 Bank of Namibia: Determinations under the Banking Institutions Act, 1998 (Act No. 2 of 1998), as amended: Imposition of Administrative Fines (Bid – 25) .................................................................... 1

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General Notice BANK OF NAMIBIA No. 284 2013 DETERMINATIONS UNDER THE BANKING INSTITUTIONS ACT, 1998 (ACT NO. 2 OF 1998), AS AMENDED: IMPOSITION OF ADMINISTRATIVE FINES (BID – 25) In my capacity as Governor of the Bank of Namibia, and under the power vested in the Bank by virtue of section 71(3) of the Banking Institutions Act, 1998 (Act No. 2 of 1998) as amended, read in conjunction with 73A of the afore mentioned Act, I hereby issue this Determination on the Imposition of Administrative Fines (BID-25), which Determination shall become effective from date of publication in the Gazette. I.W.SHIIMI GOVERNOR Windhoek, 27 June 2013

2 Government Gazette 19 July 2013 5244 Determination No. BID - 25 IMPOSITION OF ADMINISTRATIVE FINES Arrangement of Paragraphs PART I Preliminary PARAGRAPHS

1. Short Title
2. Authorization
3. Application
4. Definitions PART II Statement of Policy
5. Purpose
6. Scope
7. Responsibility PART III Implementation and Specific Requirements
8. Maximum daily fines
9. Grounds for imposing administrative fines
10. Assessment of administrative fines
11. Procedural rules
12. Right to appeal PART IV Corrective Measures
13. Remedial Measures PART V Effective Date
14. Effective Date PART VI Appendices A. Considerations in appraising administrative fines B. Categories of severity of contravention or non-compliance PART I: PRELIMINARY
15. Short Title – Imposition of Administrative Fines
16. Authorization – Authority for the Bank to issue this Determination is provided in section 71(3) of the Act.
17. Application –This Determination appliesto all banking institutions or controlling companies authorized by the Bank to conduct banking business or to exercise control over a banking institution in Namibia.

5244 Government Gazette 19 July 2013 3 4. Definitions – Terms used in this Determination are as defined in the Act, as further defined below, or as reasonably implied by the contextual usage. 4.1 “Act” means the Banking Institutions Act, 1998 (Act No. 2 of 1998), as amended. 4.2 “Administrative fines” are fines imposed by the Bank without the intervention of a court, subject to right of appeal to the Appeal Board and then to the High Court, if applicable. 4.3 “Appeal board” refers to the board of appeal constituted in terms of section 73B of the Act. 4.4 “closed day” means a Sunday or a public holiday referred to in, or declared under, the Public Holidays Act, 1990 (Act No. 26 of 1990). 4.5 “day” means any calendar day excluding a closed day. 4.6 “individual party” means a natural person employed by a banking institution or controlling company 4.7 “related party” in relation to a person means the definition provide for in section 20 (6) of the Act PART II: STATEMENT OF POLICY 5. Purpose – This Determination sets the criteria for the application of administrative fines that the Bank will impose on banking institutions or controlling companies which have contravened the provisions of the sections of the Act listed under paragraph 6 below. It further sets out mechanisms for assessing the appropriate fines to be levied on each violation. 6. Scope – This Determination applies to contraventions or non-compliance by banking institutions or controlling companies of sections 26 (16), 38 (3), 49 (6), 53 (3) or 71 (4) and (5) of the Act under which the Bank is required to determine a fine. 7. Responsibility – The board of directors of each banking institution or controlling company must be responsible for establishing policies and procedures, which are adequate to ensure that banking institutions or controlling companies do not contravene the provisions of the Act and Determinations issued in terms of the Act. PART III: IMPLEMENTATION AND SPECIFIC REQUIREMENTS 8. Maximum Daily Fines 8.1 In terms of section 73A of the Act, the Bank may impose a daily administrative fine not exceeding N$100, 000 for every day during which contravention or non￾compliance continues. 8.2 The daily fines may be assessed either as from the date: (a) of the contravention or when the non-compliance occurred and so reported by the banking institution or controlling company to the Bank; or (b) of contravention or non-compliance is detected for the first time by the Bank, including, during its on-site or off-site inspections or through the media or any other source,

4 Government Gazette 19 July 2013 5244 up to and including the day the contravention or non-compliance has been resolved by the banking institution or controlling company. 8.3 A contravention or non-compliance will be regarded as being resolved upon: (a) the rectification of the contravention or non-compliance by the banking institution or controlling company; or (b) a favourable outcome of a banking institution or controlling company`s representation made to the Bank in terms of section 73A (2) & (3); or (c) the resolution of the matter by the Appeal Board or the High Court. 8.4 Table 1 below sets out the maximum administrative fines and the corresponding sections of the Act which attract fines, in the event of a contravention thereof, in terms of section 73A. Table 1 - Maximum daily fines and corresponding sections of the Act. Topics/issues Sections of the Act Maximum daily fines as per section 73A Prohibitions and restrictions Section 26(16) N$100, 000 Exposure to holding companies, subsid￾iaries and affiliates Section 38(3) N$100, 000 Furnishing of certain statements, notic￾es, returns and information Section 49(6) N$100, 000 Production of records and furnishing of information Section 53(3) N$100, 000 Prudential Determinations Section 71(4) N$100, 000 Determinations on other matters Section 71(5) N$100, 000 9. Grounds for Imposing Administrative Fines Appraisal of administrative fines should be made when one or more of the following criteria are present. More guidelines are provided under Appendix 1 to this Determination. 9.1 A contravention or non-compliance causes substantial harm to customers or the banking institution or controlling company. 9.2 A contravention or non-compliance is willful, flagrant or shows bad faith on the part of a banking institution or controlling company, e.g. repeated or multiple violations. 9.3 A contravention or non-compliance directly or indirectly involves an individual party, associate or related party that received material or substantial benefit from the activity. 9.4 Previous supervisory actions (for example: Memorandum of Understandings, Commitment Letters or Cease-and-Desist Orders) have been ineffective in eliminating or deterring a contravention or non-compliance. 10. Assessment of Administrative Fines 10.1 In determining the appropriate administrative fine(s) for a contravention or non￾compliance by a banking institution or controlling company, the Bank will consider a number of factors (column 1 of Table 2) namely:

5244 Government Gazette 19 July 2013 5 10.1.1 Intent – whether or not a contravention has been an intentional act. 10.1.2 Frequency and Severity – the frequency or recurrence of and how severe a contravention or non-compliance is. 10.1.3 Continuation after notification – whether a contravention or non￾compliance ceased or continued after notification. 10.1.4 History of previous non-compliance – has there been previous contravention(s) or non-compliance by the banking institution or controlling company? 10.1.5 Cooperation with supervisor – has the banking institution or controlling company been cooperative? 10.1.6 History of previous supervisory or administrative actions – has the banking institution or controlling company been previously cautioned for any contravention or non-compliance? 10.1.7 Detriment to banking institution, controlling company or customers

• what is the impact on the banking institution, controlling company or customers? 10.1.8 Gain or benefit to banking institution, controlling company or related parties – the extent to which a banking institution, controlling company or related party benefited from a contravention or non-compliance. 10.2 These factors are used to categorize a contravention or non-compliance into three levels of severity as presented in the Table 2 below. The table sets out factors considered in order to determine the severity of contravention; the classification of factors i.e. low (less serious cases – column 2), medium (moderate cases – column

4. and high (serious or severe cases – column 6); and the related maximum daily fine assigned to each of the factor assessed. The total daily administrative fine for a contravention or non-compliance will be the summation of the daily fines calculated by the Bank, taking into account the maximum fine assigned to the applicable factors. In calculating or imposing the daily fine of each factor, the Bank will exercise its discretion taking into account the extent to which the factor was contravened and the prescribed maximum fines. Table 2 - Administrative Fines Matrix Factors Severity of Contravention and Related Maximum Daily Fine Per Factors Low Moderate High Assessment Max.daily fine per factor Assessment Max.daily fine per factor Assessment Max.daily fine per factor 1 2 3 4 5 6 7 Intent No intentional act; technical in nature N$2, 000 Should have known N$4, 000 Clear intent or knowingly con￾travenes N$6, 000 Frequency and Severity Isolated (single occurrence) but substantive N$3, 000 Number of occurrences which are substantial, but technical in nature N$6, 000 Numerous and repeated contra￾vention N$8, 000

6 Government Gazette 19 July 2013 5244 C o nti n u ati o n after notifica￾tion Ceased immedi￾ately upon noti￾fication N$4, 000 Ceased shortly after notification N$8, 000 Contravention continue after notification N$10, 000 History of pre￾vious non-com￾pliance Unrelated prior non-compliance N$5, 000 At least one re￾peated violation N$10, 000 Several/frequent repeated contra￾vention N$12, 000 C o - o p e r ati o n with supervisor Full coopera￾tion N$6, 000 Acknowledged caution. Full re￾sponse still to come. N$12, 000 No acknowl￾edgement or negative re￾sponse to cau￾tion N$14, 000 History of pre￾vious supervi￾sory or admin￾istrative actions Prior caution for similar con￾travention N$7, 000 Few cases of prior cautioning/ r e p rim a n di n g for similar con￾travention N$14, 000 Prior supervi￾sory actions/ resolution out￾standing N$16, 000 Detriment to banking institu￾tion, control￾ling company or customers Minimal im￾pact; no unsafe practices or breach of fidu￾ciary duty

Moderate im￾pact on consum￾ers or bank; no unsafe practice or breach of fi￾duciary duty N$10, 000 Substantial im￾pact N$18, 000 Gain to banking institution, con￾trolling com￾pany or related parties No or minimum benefit to relat￾ed party

Significant, but indirect benefit to related party N$6, 000 Significant, but direct benefit to related party N$16 000 Appendix II to the Determination provides more detailed information on the factors considered for determining the appropriate administrative fines and the categorization of the contravention or non￾compliance according to levels of severity. 11. Procedural rules The Bank must, when imposing administrative fines, follow the procedural rules provided under section 73A (2) and (3) of the Act. 12. Right to appeal 12.1 A banking institution or controlling company may, if dissatisfied with the decision made or fine imposed by the Bank, appeal to the Appeal Board as outlined in section 73A (4) of the Act. 12.2 A banking institution or controlling company may, if dissatisfied with the decision of the Appeal Board, further appeal to the High Court as outlined in section 73A (6) of the Act. PART IV: CORRECTIVE MEASURES 13. Remedial measures – If a banking institution or controlling company fails to comply with this Determination, the Bank may pursue any remedial measures as provided under the Act. PART V: EFFECTIVE DATE 14. Effective date – The effective date of this Determination shall become effective from date of publication in the Gazette.

5244 Government Gazette 19 July 2013 7 Questions relating to this Determination should be addressed to: The Director Banking Supervision Department Bank of Namibia P.O. Box 2882 Windhoek Namibia Tel: 283 5040

8 Government Gazette 19 July 2013 5244 Appendix I A. Considerations in Appraising Administrative Fines The following factors should be used in determining an appropriate administrative fine to be imposed for contravention or non-compliance of the respective provisions of the Act, Determinations or Regulations.

1. Evidence that the contravention or pattern of contravention wasintentional or committed with the disregard of the law or with a disregard of the consequences to the banking institution or controlling company;
2. The frequency or recurrence of the contravention or non-compliance and the length of time the contravention or non-compliance has been outstanding;
3. Continuation of the contravention or non-compliance after the banking institution or controlling company becomes aware of it, or its immediate termination and correction;
4. Failure to cooperate with the Bank in effecting early resolution of the problem;
5. Evidence of concealment of the contravention or non-compliance, or voluntary disclosure of the contravention or non-compliance;
6. Any threat of loss, actual loss, or other harm to the banking institution or controlling company, including harm to the public`s confidence in the banking institution or controlling company, and the degree of the harm;
7. Evidence that participants or their associates received financial, or other gain, or benefits, or preferential treatment as a result of the violation or from the violation;
8. Evidence of any restitution (amends) by the participants in the contravention or non￾compliance;
9. History of prior contraventions or non-compliance, particularly where they are similar to the contravention or non-compliance under consideration;
10. Previous caution of the banking institution or controlling company for similar contravention or non-compliance;
11. Presence or absence of a compliance program or its effectiveness;
12. Tendency to create unsafe or unsound banking practices or breaches of fiduciary duty;
13. The existence of commitments, or conditions imposed in writing intended to prevent the contravention or non-compliance; and
14. Any otherfactorsthat theBankmay deemnecessary to considerforthe purpose of determining an appropriate fine.

5244 Government Gazette 19 July 2013 9 Appendix II B. Categories of Severity of Contravention or Non-Compliance

1. Low – Comprises less serious cases of non-compliance for example: 1.1 No evidence of intentional act but caused by technical factorssuch assystem failures. 1.2 Cases of contravention or non-compliance where the occurrences are isolated (single occurrence) but are substantive in nature. 1.3 Contravention or non-compliance ceased immediately after notification. 1.4 Contravention or non-compliance is unrelated to previous cases. 1.5 The banking institution or controlling company is cooperative. 1.6 An entity has been previously cautioned forsimilar contravention or non-compliance. 1.7 Contravention or non-compliance will have minimum impact on consumers, banking institution or controlling company and no unsafe practices or breach of fiduciary duty. 1.8 There has been no significant benefit, if any, to affiliated party or parties.
2. Moderate – Comprises of moderate cases of contravention or non-compliance for example: 2.1 Where the banking institution or controlling company should have known that the action taken or failure to act could lead to a contravention or non-compliance. 2.2 There have been a number of occurrences but which are technical in nature. 2.3 Contravention or non-compliance ceased shortly after notification. 2.4 There is at least one repeated contravention or non-compliance. 2.5 Acknowledge caution and detailed response is to be provided in due course. 2.6 There are few cases of prior cautioning for similar contravention or non-compliance. 2.7 Contravention or non-compliance will have moderate impact on customers, banking institution or controlling company. 2.8 There has been significant benefit to affiliated party (ies).
3. High – Comprises of more serious or severe cases of contravention or non-compliance for example: 3.1 Evidence of a clear intent to or knowingly contravene or fail to comply. 3.2 Frequent or numerous repeated contravention or non-compliance of substantive nature. 3.3 Contravention or non-compliance continued for a period of time after notification and/or is still continuing.

10 Government Gazette 19 July 2013 5244 3.4 History of several/frequent repeated contravention or non-compliance. 3.5 No acknowledgement or negative response of caution by management. 3.6 Prior board resolution or commitment letter issued. 3.7 Substantial impact on customers, the banking institution or controlling company. 3.8 There has been indirect/direct significant benefit to affiliated party.

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