Sasfin apologises for ‘criminal activity’ in its former forex business

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The fraudulent actions resulted in a R160m fine from the SA Reserve Bank.

The board and management of boutique wealth management firm Sasfin “deeply regret” the fraudulent activity that took place in the organisation, it noted in its full-year results announcements for 2024 on Tuesday.

“We are acutely aware of the devastating impact of financial crime in South Africa, of which Sasfin has also been a direct victim.”

Sasfin employees allegedly helped Gold Leaf Tobacco launder money in an intricate web, which the group describes as the “activities of a criminal syndicate of former clients and staff, working outside of their scope of employment of the now closed-down forex business of Sasfin Bank”.

“Since discovering this syndicate, Sasfin took significant steps, which included laying criminal charges against the implicated employees, responsibly exiting the forex business at a considerable cost, and taking steps to further strengthen its compliance and control environments,” it says.

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Fine

The criminal activities led to a R160 million fine being imposed on Sasfin Holdings, which has eaten into the wealth management firm’s full-year earnings as it was forced to raise a R55 million provision.

In August 2024, the South African Reserve Bank’s Prudential Authority (PA) issued Sasfin Bank with notices of administrative sanctions in terms of the Banks Act, the Financial Sector Regulation Act, and the Financial Intelligence Centre Act.

The sanctions amounted to R209.69 million, of which R49.05 million has been suspended.

Sasfin previously said it would defend and appeal the matter, but emphasised that it would continue to engage with the regulators to ensure a reasonable and proportionate outcome.

“Notwithstanding these ongoing engagements with regulators and the uncertainty regarding the outcomes of such matters, based on the input received from counsel and after applying judgment in considering a range of possible outcomes, a provision of R55 million has been recognised,” it notes.

Sasfin received further notice of potential action from the Reserve Bank in relation to alleged contraventions by former staff and clients of the discontinued forex business.

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Sars

On 9 January 2024, it was served a civil summons for R4.9 billion, plus interest and costs, in the form of a damages claim instituted by the South African Revenue Service (Sars).

The legal opinion that Sasfin Bank obtained “unequivocally concludes” that the civil claim (from Sars) falls outside the recognised parameters of applicable law and has a remote likelihood of success.

Significant losses�

Sasfin saw a significant drop in earnings in the full year ended 30 June 2024, posting a headline earnings loss of R58.68 million.

This is compared to a profit of R112.68 million in the corresponding 2023 period. The group reported a loss per share of 190.96 cents for FY2024, compared to headline earnings per share of 366.18 cents in the prior year.

Sasfin finally published its results after facing suspension from the JSE for failure to submit its results within the stipulated three-month period in terms of the bourse’s listing requirements.

On 16 October, the JSE put Sasfin on notice that the trading of its shares could be suspended as a result of the late submission.

Apart from the administrative sanctions, the loss was also partly due to an increase in expected credit losses and a decline in non-interest income, driven by negative fair value adjustments in the private equity portfolio.

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Strategic reset

Sasfin group CEO Michael Sassoon says the company has strengthened its balance sheet, despite the challenges it has encountered – which “puts us in a strong position to finalise our strategic reset” (due for completion at the end of 2025).

Sassoon believes the actions Sasfin has taken over the past 18 months put the group on a “solid footing” for the future.

The strategic reset, announced in March 2023, included the disposal of Sasfin’s specialised finance and commercial solutions businesses, as well as its commercial property finance business, to African Bank, and an intended delisting from the JSE, subject to relevant approvals, which the group aims to conclude in the coming months.

“We are well on our way to emerge as a leaner organisation,” Sassoon notes.

Sasfin aims to focus on its rental finance and wealth businesses where it believes it has strong competitive positions.

In the period under review, Sasfin Wealth reported an operating profit of R139.8 million (2023: R117.3 million). Assets under management and advice came in at R65 billion, slightly down from the R67.4 billion recorded in 2023.