Introduction

Highlights

• Kept pace with regulatory change.

Challenges in 2005

• Managing the resources and cost implications of compliance with new legislation.
• Implementing systems to comply with regulatory requirements.
• Providing training to employees on regulatory developments.

Looking ahead we will:

• Maintain the high standards of compliance and reporting set by the bank.

Overview

In South Africa, there are over 100 acts, codes and other regulations that directly impact the banking industry.

Standard Bank is committed to responding appropriately to all legislation and is focused on ensuring that regulatory compliance is achieved along with business value.

The bank remains active in the consultative process of policy making and regulatory development in South Africa, being represented at an industry level by the Banking Association. We also regularly make individual submissions to the relevant authorities to protect and advance the interests of our stakeholders.

In South Africa, the Bank Supervision Department of the South African Reserve Bank (SARB) is our lead regulator while the Financial Services Board (FSB) has jurisdiction over consumer protection issues relating to banking and assurance products. Our offshore operations are subject to the regulations imposed by the regulatory bodies of their respective host countries.

Locally, the key regulatory challenges for the bank during 2005 related to implementing the FICA requirements for the re-identification and verification of customers, and the FSB’s accreditation of financial service providers in terms of FAIS.

Stock Exchange listings

The Standard Bank Group Limited is listed on the JSE Limited, the Namibian Stock Exchange (NSX) and the Bond Exchange of South Africa. These listings require adherence to the relevant requirements, one of which includes annual confirmation to the JSE and NSX that all respective JSE Listing Requirements have been complied with.

New legislation

Over the past few years there have been a number of significant regulatory developments that have impacted the bank domestically. These are outlined below.

Financial Advisory and Intermediary Services Act (FAIS), 2002

This act was introduced to regulate the function of giving advice and rendering an intermediary service on financial products. During the last year, 22 FAIS licences were issued to group entities. All key individuals and representatives within the bank have undergone training and have received letters of authority enabling them to give advice to customers. All other employees have received awareness training.

A register of representatives has been submitted to the FSB. These registers are intended as a tool to be used by financial service providers and customers to confirm the fit and proper status of representatives.

The bank has an internal complaints resolution process. Matters that cannot be resolved internally are escalated to the FAIS Ombud.

Protection of Constitutional Democracy Against Terrorist and Related Activities Act (POCDATARA), 2004

This act is aimed at providing measures to prevent and combat terrorist and related activities. It defines the offence of terrorism as well as other offences related to or connected with terrorist activities. The main offence impacting the bank relates to terrorist financing activities. If the bank does anything with any funds that are in any way linked to any terrorist activity or person suspected of being a terrorist, the bank will be guilty of an offence. POCDATARA also places a requirement on the bank to report:

• Any person who we suspect either intends to commit or has committed a terrorist offence; or
• If we are aware of the presence of a such person at any place.

Standard Bank regularly checks its entire customer database against the United Nations Security Council list for known terrorists. No matches have so far been identified.

National Credit Bill

This bill (to be promulgated shortly) restructures and reassesses the law of lending, to ensure responsible lending.

Standard Bank’s NCB project committee analysed the bill and submitted comments to Parliament. A number of workshops have been held with the business units affected to discuss the impact of the bill and implementation plans are being executed.

Regulation of Interception of Communications and Provision of Communication-Related Information Act (RICA), 2002

A review of the group electronic communications policy, to comply with the requirements of RICA, is currently underway. Once the policy has been amended, a groupwide awareness campaign will be undertaken.

The Financial Intelligence Centre Act (FICA), 2001

The purpose of this act is to curb financial crime. The group money laundering control office is responsible for FICA compliance, with the table below indicating our responses to the main requirements.

Internal controls for FICA requirements

Know Your Customer (KYC)	KYC procedures have been formulated for all new accounts. An extensive project has been initiated to re-identify all existing customers, with quarterly progress reports to the SARB.
Suspicious transaction reporting	Suspicious transaction reports are submitted to the group money laundering reporting office, where they are analysed and where appropriate included in formal reports to the Financial Intelligence Centre.
Governance, policies and procedures	The group money laundering control office submits monthly reports to the group executive committee and quarterly reports to the group audit committee and group risk management committee.
Record keeping	Records are kept of all KYC information and supporting documentation that have been obtained from the customer. This includes inter alia: The name of the person who obtained the information and supporting documentation. All transactions undertaken by the bank, whether in the course of a business relationship or single transaction. Records kept must incorporate:   the parties to each transaction; the amount involved; and the accounts involved in each transaction. All customer information and verification documentation obtained during customer re-identification procedures. All employees that have been trained in terms of money laundering control.
Monitoring	Money laundering control monitoring takes place on the following three levels: structural monitoring; routine monitoring; and special monitoring.