Standard Bank Steps Up Fraud Controls as Losses to Fines Mountby
Shareholders criticize bank for paying bonuses amid penalties
Lender says governance process is thorough and ‘works’
Standard Bank Group Ltd. said it is bolstering internal controls after shareholders criticized managers and executives at Africa’s biggest bank by assets for a series of fines and losses tied to fraud.
The company plans to add to its 400 compliance officers after hiring about 300 employees to the division over the past year, co-Chief Executive Officer Sim Tshabalala and director Richard Dunne told shareholders at an annual general meeting in Johannesburg on Thursday. Standard Bank has also trained staff on how to spot “red flags” related to bribery and employed an external expert, general counsel Ian Sinton said.
Standard Bank has been fined more than $50 million over the past two years, which includes penalties in the U.K. and South Africa for not having adequate anti-money laundering policies in place. Last year, the lender agreed to a $36.9 million settlement after Tanzanian employees bribed government officials. Last week, the company said it lost as much as 300 million rand ($19 million) to organized fraud in Japan.
Executives should be punished and their bonuses withheld if the bank is failing to adhere to regulatory issues, Theo Botha, a shareholder activist and founder of Proxy View, which advises investors on how they can vote on company resolutions, said.
“There is a lack of disclosure and the chief executive officers should accept responsibility,” he said.
While guaranteed pay for Standard Bank’s joint CEO’s Tshabalala and Ben Kruger was little changed in 2015, their combined compensation including incentives and excluding long-term share-based awards jumped 43 percent. Shareholders holding 15.5 percent of Standard Bank’s stock voted against the company’s remuneration policy on Thursday.
“The governance process accounts for all breaches,” Ted Woods, the director and chairman of Standard Bank’s remuneration committee, told shareholders. “They are all brought to the remuneration committee. We debate them and then decide on the reductions. The governance design here is thorough and it works.”
Standard Bank dismissed staff in Tanzania, while others were incarcerated and the entire board restructured, Tshabalala said. “Ben and myself were penalized in our performance reviews,” he said.
The steps come as Standard Bank on Thursday said expenses rose faster than income growth in the first quarter, exacerbated by a weaker rand, while economic conditions in the markets in which it operates remain challenging.