…issues penalty of N$1 million to one institution, cautions many
In its money laundering and the financing of terrorist and proliferation activities, the Namibia Financial Institutions Supervisory Authority (NAMFISA) has issued a financial penalty amounting to N$1 million to one accountable institution (AI) in the capital markets space for non-compliance, the Authority’s latest annual report for the year ended 31 March 2023 reveals.
Although unnamed, the institution was found non-compliant with the risk management processes, customer due diligence, the monitoring of transactions, enhanced due diligence, screening customers against the United Nations Security Council Sanctions (UNSC) Lists, reporting suspicious transactions to the FIC, reporting cash transactions above the reporting threshold of N$99,999.99, and the directive to apply adequate remedial actions to address the deficiencies identified during previous assessments.
The Authority has a statutory mandate to supervise accountable and reporting institutions under its purview for Anti-Money Laundering, Combating the Financing of Terrorism & Countering Proliferation Financing (AML/CFT/CPF) purposes. As a result, supervisory activities are conducted in terms of an annual Supervisory Plan. In executing this Plan during the reporting period, the Authority conducted various on and off-site inspections.
The Authority conducted twelve risk-based on-site inspections of accountable institutions (AIs) in the capital markets space and the microlending space. On the other hand, the Authority conducted 31 AML/CFT/CPF off-site inspections of AIs in the capital markets space, life insurance, and microlending space.
“The objective of these inspections was to assess the adequacy of compliance policies as well as the effectiveness of remedial measures adopted by AIs to address control weaknesses identified during the previous off-site inspections. The off-site inspections were aimed at identifying compliance gaps and providing guidance,” said NAMFISA in the report.
Subsequently, the Authority issued three cautions to microlenders for non-compliance with customer due diligence, keeping up-to-date customers’ records, and screening customers against the UNSC Lists.
“In this regard, the Authority imposed lighter sanctions as the affected industry is rated as low risk in terms of the ML/ TF/PF risks. The Authority issued three cautions to AIs in the capital markets space for the failure to meet the remediation timelines, make clients’ records available within the given timelines, and identify a politically exposed person (PEP). Furthermore, the Authority issued a reprimand to one AI in the capital markets space for failure to provide records within the given timelines,” added NAMFISA.
Regarding AIs in the life insurance space, the Authority issued one caution to one AI for non-compliance with the risk management processes, ongoing customer due diligence, and performing an independent audit on all AML/CFT/CPF controls adopted to mitigate ML/TF/ PF risks.
“Following the amendment of the 2015 Financial Intelligence Act regulations, the AML/CFT/CPF Appeal Board commenced with the appeal process in respect of the appeals lodged by AIs against financial penalties imposed by the Authority in the previous reporting period. The Appeal Board is yet to deliver judgments concerning these matters,” further explained Namfisa.
Further, the Authority provided comments on the draft Mutual Evaluation Report (MER) before being finalised and adopted in September 2022 by the Eastern and Southern Africa Anti-money Laundering Group (ESAAMLG) Council of Ministers in Livingstone, Zambia.
As a result of deficiencies identified during the mutual evaluation, Namibia was referred to the International Cooperation Review Group (ICRG) of the Financial Action Task Force (FATF) for enhanced monitoring.
“As such, Namibia is expected to demonstrate the achievement of progress with regard to addressing the deficiencies identified during the ME in order to exit the enhanced follow-up process. Therefore, the Authority is making strides to ensure that all the deficiencies in respect of the Authority’s execution of its AML/CFT/CPF mandate are timeously addressed.”
FINANCIAL PERFORMANCE
Meanwhile, NAMFISA has endured a total comprehensive deficit for the year ended 31 March 2023 amounting to N$8.9 million.
This deficit is however positive compared with a budgeted deficit of N$22.8 million.
NAMFISA Chief Executive Officer, Kenneth Matomola las week said that NAMFISA continued to maintain a sound financial position during the review period, despite challenges that adversely affected the financial performance of supervised entities.
“During the review period, levy income amounted to N$228.9 million which represents an increase of 0.09 percent (N$200,000) compared with the levy income recorded for the prior financial year. The increase in levy income indicates that the NBFIs remained financially stable, sound, and resilient, despite the challenging economic environment,” he said.
The Authority incurred a total expenditure of N$260.6 million representing a 4.3 percent (10.8 million) increase compared to prior financial year.
“As a regulator, NAMFISA is highly reliant on its human resources. Consequently, staff costs made up the largest share (73 percent) of the total expenditure. Staff costs increased by 4.8 percent to N$191.2 million, compared with the previous financial year,” he added.
Compared to 2022, risks to Namibia’s financial system’s stability have eased, while other risks have increased. These increased risks are primarily associated with developments in the macroeconomic environment, which have a subsequent impact on household and corporate debt, the banking sector, and NBFIs. The upsurge in risks has resulted mainly from the significant slowdown in global output, increased global financial turbulence, the depreciation of the Namibia dollar (NAD) against major currencies, as well as sovereign credit rating downgrades.
“During the period under review, the non-bank financial sector remained robust. The NBFI assets contracted by 1.2 percent to N$366.2 billion during the 2022 year, due largely to the poor market performance of equity markets in Namibia and abroad. Risks inherent to NBFIs include inflation and its impact on the affordability of NBFI services, particularly medical aid funds, long-term insurance, and short-term insurance. Regardless, the non-bank sector remained solvent and is expected to continue as such in the short-to-medium term. The stability of the sector is attributed to the collaborative, effective, and prudent execution of NAMFISA’s mandate by all stakeholders.” Matomola added.