Compliance: when ‘good enough’ is so last year
Lelani van der Merwe
Compliance is no longer just a checkbox exercise - it’s a critical safeguard for the financial industry and its clients. With South Africa’s greylisting and the rise of sophisticated fraud, financial service providers must embrace a proactive and thorough approach to meet heightened regulatory demands and protect their reputations.
Compliance: when ‘good enough’ is so last year
“When it comes to compliance, the game has changed, and there’s no going back.” This is according to Michael Field, Executive Director and GM of Investments at Fedgroup. He explained, what was once deemed adequate is no longer sufficient, due to heightened scrutiny from financial industry regulators in response to a number of factors. This includes South Africa's greylisting by the Financial Action Task Force (FATF), and the surge in criminal activities. Also, technology’s rapid evolution has opened new doors for cybercrime, making stringent compliance requirements not just a regulatory demand, but a necessity. Simply because it’s about safeguarding clients and the financial industry as a whole.
South Africa’s greylisting has cast a harsh spotlight on compliance failures. “In fact, non-compliance with FICA requirements was a contributing factor to greylisting,” Field emphasised. And added, “Following the rules isn’t just about regulations, it’s about rebuilding trust and credibility in the financial sector and exiting the greylist hinges on proving that we take compliance seriously.”
Not business as usual
The status quo of compliance is long gone, as today’s Financial Service Providers (FSPs) navigate a different landscape shaped by advanced technology and rising criminal activity. For those holding a Life licence, the stakes are even higher, with heightened regulatory obligations demanding nothing short of full compliance.
“We stay ahead of the curve by keeping up-to-date with regulatory shifts and working closely with advisors to simplify the processes for clients,” said Lelani van der Merwe, Head: GRC (Governance, Risk Management and Compliance) at Fedgroup. “For example, submitting a clear copy of an identity document (ID) with visible security features can eliminate the need for certification, saving time without compromising compliance standards.”
Think about it – photocopying has evolved. Grainy, unclear copies once sufficed, but today’s technology produces near-original replicas. Naturally, this has led to stricter requirements: ID copies now need to be clear enough to verify the client’s identity and reveal security features. Asking for a high-quality copy isn’t nitpicking, it’s a practical necessity in a world where fraud is just a photocopy away.
But compliance isn’t always straightforward. “Take proof of address,” Van der Merwe continued. “It’s hard to comply when a municipality only displays your initials and surname on utility bills, and we’re asking for your full names and surname. We get it, and therefore, we aim to make compliance as painless as possible by looking at other supporting documents.”
And not everyone is tech-savvy. “We’ve even guided advisors on how to send a photo from their smartphones which reflects the reality: technology isn’t second nature to everyone, and compliance is a collective learning curve. And well worth mentioning that we have definitely seen many advisors recognising the value of compliance and the fact that this protects their clients and not viewing it as a hindrance in the process.”
Practical implications
But not all FSPs are keeping pace, and the consequences can be severe. Regulators don’t shy away from handing out hefty fines, and the reputational damage can be even more costly.
“For large institutions, multimillion-rand fines might not sting too much, but for a player such as a small brokerage, non- or partial compliance could mean the end of their business,” warned Field. “Staying compliant isn’t just about dodging penalties, it’s about protecting clients and their financial well-being.”
Van der Merwe highlighted the importance of being alert and remaining compliant by sharing some real-life examples. “An elderly client submitted existing FICA documents to us, which was accepted by another accountable institution. However, our insistence on high-quality documentation revealed that the initial documents were fraudulent, and we could prevent potential fraud.”
She elaborated further, “Vulnerable clients are often defrauded by people entrusted with their care or even by family members with access to their personal information. Due to our commitment to upholding strict compliance regulations, our processes managed to flag and prevent potential incidents.”
A standard worth upholding
In a world where the rules are only getting stricter, doing what’s right is no longer optional. “It’s worth highlighting“, Field said “That while we uphold higher standards than certain institutions (some of which have been fined), we remain within compliance requirements. We also strive to make compliance simpler, proving that high standards don’t have to mean greater difficulty.”
Writer’s thoughts
For brokers and advisers, compliance isn’t just about ticking boxes - it’s about protecting clients and building trust in an ever-evolving financial landscape. By embracing higher standards and simplifying processes, we not only safeguard our businesses but also strengthen the credibility of the entire industry. How can we, as financial professionals, shift our mindset from viewing compliance as an obligation to seeing it as a powerful tool for building trust and protecting our clients’ futures? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts myra@fanews.co.za.
Comments
This is factual: Fedgroup is a Tech company in Financial Services. This is a huge advantage and brokers/intermediaries that regularly deal with Fedgroup, can attest to that. Fedgroup could be a Decade ahead of its peers, Tech speaking. Report Abuse