Foremost Finance (Pty) Ltd Notice of Administrative Sanction

Executive Committee:
Commissioner: U. Kamlana I Deputy Commissioners: A. Ludin I K. Gibson

ENQUIRIES: Mpho Radebe D. DIALLING NO.: (012) 422 2848 OUR REF: FSP 40977 E-MAIL: mpho.radebe@fsca.co.za DATE: 13 October 2021 Mr S Humby Foremost Finance (Pty) Ltd Ground Floor Falcon House 31 Wessel Road Rivonia Place Rivonia E-mail: shumby@foremostfinance.net Dear Mr Humby NOTICE OF ADMINISTRATIVE SANCTION

1. The Financial Sector Conduct Authority (FSCA) is satisfied that Foremost Finance
   (Pty) Ltd (Foremost Finance), an authorised financial services provider and an accountable institution as envisaged in terms of item 12 of schedule 1 of the Financial Intelligence Centre Act 38 of 2001 (FIC Act), has failed to comply with the FIC Act. Accordingly, the FSCA hereby issues this Administrative Sanction Notice (the Notice).
2. Nature of Non-compliance:
   Risk Management and Compliance Programme
   2.1.Section 42(1) of the FIC Act requires Foremost Finance to develop, document, maintain and implement its Risk Management and Compliance Programme (RMCP). Section 42(2)(a) of the FIC Act stipulates that the RMCP must enable Foremost Finance to identify, assess, monitor, mitigate and manage the risk that the provision by Foremost Finance of products or services may involve or facilitate ML/TF. Section 21(1) of the FIC Act states that when an accountable institution engages with a prospective client to enter into a single transaction or to establish

a business relationship, the institution must in the course of concluding that single transaction or establishing the business relationship and in accordance with its RMCP establish and verify the identity of the client. The RMCP must determine the processes by which enhanced due diligence is conducted for higher risk business relationships and when simplified customer due diligence will be conducted by the accountable institution.
2.1.1. At the time of the inspection, Foremost Finance’s RMCP did not comply with
the requirements set out in sections 42(1), 42(2)(a) and 21(1) of the FIC Act read with Guidance Note 7 issued by the FIC, in that the RMCP did not enable Foremost Finance to assess its inherent risks which further impacted on its ability to monitor, mitigate and manage the said risks and the customer due diligence was not conducted in terms of the inherent risks. This also impacted on the effectiveness of Foremost Finance’s risk matrix because all of the relevant risk factors were (i) not provided for in the risk matrix, and (ii) those that are provided for in line with the RMCP, are not in all instances applied to clients where relevant. 2.2.Sections 42(2)(d) and (f) of the FIC Act read together with Guidance Note 7 issued by the FIC stipulates that the accountable institution’s RMCP should:

• provide for the manner in which and the processes by which the verification
  of the identity of persons who must be identified is performed in the institution; and
• provide for the manner in which and the processes by which the institution
  conducts additional due diligence measures in respect of legal persons in terms of section 21B(2).
  2.2.1 At the time of inspection Foremost Finance’s RMCP was not compliant with
  sections 42(2)(d) and (f) of the FIC Act read together with Guidance Note 7 issued by the FIC in that it did not explain in detail how the identity of beneficial owners will be established and the documentation that will required.

Customer due diligence
2.3.Section 21(1) of the FIC Act states that when an accountable institution engages with a prospective client to enter into a single transaction or to establish a business relationship, the institution must in the course of concluding that single transaction or establishing the business relationship and in accordance with its RMCP establish and verify the identity of the client.
2.3.1 A total of 60% of Foremost Finance clients sampled by FSCA were not
identified and verified in line with its RMCP.
3. Other relevant factors:
3.1. The non-compliance findings are serious contraventions of the FIC Act.
3.2. All accountable institutions were given 18 months to implement the amended
provisions of the FIC Act which includes the non-compliance identified by the FSCA.
3.3. Foremost Finance has cooperated with the FSCA during and post the
inspection.
3.4. The FSCA has no record of a previous non-compliance with any law by
Foremost Finance.
3.5. The responses received on 14 June 2021 and 25 August 2021 respectively
demonstrated that the findings as set out in paragraph 2.2.1, 2.2.2 and 2.3.1 to be remediated.
3.6. Based on the above, the FSCA is satisfied that the revised RMCP has
materially improved and deemed it appropriate to partially suspend the financial penalty outlined in the notice of intention to sanction.
4. Particulars of the administrative sanction:
4.1. In terms of section 45C(1), read with sections 45C(3)(c), and 45C(6)(a) of the
FIC Act, the FSCA hereby imposes the following administrative sanction on Foremost Finance:

4.1.1. A financial penalty of R80 000 for non-compliance with sections 42(1),
42(2)(a), 42(2)(d) and 42(2)(f) of the FIC Act, read with Guidance Note 7 issued by the FIC. Foremost Finance is directed to pay the financial penalty of R20 000 on or before 21 October 2021 for failure to comply with sections 42(1), 42(2)(a), 42(2)(d) and 42(2)(f) of the FIC Act read together with Guidance Note 7 issued by the FIC. The payment of the remaining R60 000 is suspended for a period of 3 years from the date of this Administrative Sanction, on condition that Foremost Finance remains fully compliant with sections 42(1), 42(2)(a), 42(2)(d) and 42(2)(f) of the FIC Act read together with Guidance Note 7 issued by the FIC. Should Foremost Finance be found to be non-compliant with sections 42(1), 42(2)(a), 42(2)(d) and 42(2)(f) of the FIC Act, read together with Guidance Note 7 issued by the FIC, within the 3 years suspension period the suspended penalty of R60 000 becomes immediately payable.
4.1.2. A financial penalty of R80 000 for non-compliance with sections 21(1)
of the FIC Act.
Foremost Finance is directed to pay the financial penalty of R40 000 on or before 21 October 2021 in respect of the RMCP failure to comply with the requirements of section 21(1) of the FIC Act. The payment of the remaining R40 000 is suspended for a period of 3 years from the date of this Administrative Sanction, on condition that Foremost Finance fully compliant with the requirements of section 21(1) the FIC Act. Should Foremost Finance be found to be non-compliant with section 21(1) of the FIC Act, read together with Guidance Note 7 issued by the

FIC, within the 3 years suspension period the suspended penalty of R40 000 becomes immediately payable.
4.2. The financial penalty of R60 000 is payable via electronic fund transfer to:
Account Name : NRF – FIC Act Sanctions
Account Holder : National Treasury
Account Number: 80552749
Bank : South African Reserve Bank
Code : 910145
Reference : FIC Sanction – Foremost Finance (Pty) Ltd
4.3. Proof of payment must be submitted to the FSCA at mpho.radebe@fsca.co.za
and copy charl.geel@fsca.co.za.
5. Right of appeal:
5.1. In terms of section 45D of the FIC Act, read with Regulation 27C of the
Regulations promulgated in terms of GN R1595 in GG 24176 of 20 December 2002 as amended, Foremost Finance may lodge an appeal within 30 days, from the date of receipt of the Notice. The notice of appeal and proof of payment of the mandatory appeal fee must be-:
5.1.1. hand delivered to:
The Secretary: The FIC Act Appeal Board
Byls Bridge Office Park, Building 11
13 Candela Street
Highveld Extension
Centurion
5.1.2. sent via electronic mail to:
The HOD: Office of General Counsel
FSCA
Attention: Mr S Rossouw (Stefanus.Rossouw@fsca.co.za)
5.2. Mr G Dudeni, Secretary of the FIC Act Appeal Board, may be contacted at
Gcinikhaya.Dudeni@fic.gov.za and telephonically at (012) 641-6243 should

FOREMOST FINANCE require further information regarding the appeal process. Details of the appeal process can also be found on the FIC’s website at www.fic.gov.za.
6. Failure to comply with the administrative sanction:
6.1. In terms of section 45(C)(7)(b) of the FIC Act, should Foremost Finance fail to
pay the prescribed financial penalty in accordance with this notice and an appeal has not been lodged within the prescribed period, the FSCA may forthwith file with the clerk or registrar of a competent court a certified copy of this notice, which shall thereupon have the effect of a civil judgement lawfully given in that court in favour of the FSCA.
7. Publication of sanction:
7.1. The FSCA will make public the decision and the nature of the sanction imposed
in terms of section 45C(11) of the FIC Act.
Yours faithfully

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Kedibone Dikokwe
For the Financial Sector Conduct Authority