The Hidden Costs of Ignoring Compliance Audits
Compliance audits are often seen as a mere regulatory requirement, but ignoring them can lead to crippling financial losses, legal penalties, operational setbacks, and reputational damage.
In South Africa’s increasingly stringent regulatory landscape, businesses that fail to prioritise compliance audits risk being blindsided by enforcement actions and costly disruptions.
This paper explores:
✔️ The hidden financial and legal risks of non-compliance
✔️ A real South African case study demonstrating the consequences
✔️ Quick wins for strengthening compliance
✔️ Common pitfalls to avoid
Proactive compliance isn’t just about avoiding penalties—it’s about securing your organisation’s future.
Read the full paper and learn how to protect your business from the high cost of non-compliance.
Introduction
In an increasingly regulated business environment, compliance audits have become critical for ensuring that organisations meet legal and ethical standards. These audits, whether internal or conducted by regulators, aim to verify adherence to laws, regulations, and internal policies. Yet, many businesses in South Africa and beyond treat compliance audits as a low priority or a box-ticking exercise. Ignoring or neglecting these audits might save time or money in the short term, but it quietly invites significant risks that can cripple an organisation in the long run. The hidden costs of non-compliance – from legal penalties and financial losses to reputational damage and operational disruptions – often far exceed the apparent savings of skimping on compliance checks.
This paper explores the general risks associated with non-compliance, specifically focusing on the South African context. It delves into the legal, financial, reputational, and operational risks that arise when compliance audits are ignored. Practical insights are provided into quick wins for improving compliance and common pitfalls businesses should avoid. A South African case study illustrates the real-world consequences of failing to comply with regulatory audit requirements. The discussion concludes with a call to action urging organisations to prioritise compliance audits to mitigate these hidden costs and risks.
The Risks of Non-Compliance
The repercussions can be severe when a business fails to comply with laws or regulations. These repercussions fall into several broad categories: legal consequences, financial losses, reputational harm, and operational setbacks. South African companies must navigate a particularly complex regulatory landscape – from the Companies Act and tax laws enforced by SARS, to sector-specific rules (like the Broad-Based Black Economic Empowerment codes, the Protection of Personal Information Act, environmental regulations, and labour laws). Ignoring compliance audits in such areas can lead to compounding problems. Below, we examine each risk category, highlighting how non-compliance translates into tangible costs.
Legal and Regulatory Risks
One of the most immediate dangers of ignoring compliance audits is the potential for legal penalties. Regulatory authorities have the power to impose fines, sanctions, or even criminal charges on organisations that breach the law. In South Africa, agencies and bodies such as the Financial Sector Conduct Authority (FSCA), the South African Revenue Service (SARS), the Department of Labour, and others have become increasingly vigilant. The FSCA, for example, ramped up enforcement by imposing nearly R943 million in administrative penalties for non-compliance in the 2023/24 financial year – a dramatic increase from about R100 million the previous year. This surge in fines is partly driven by efforts to address deficiencies identified by international bodies (such as South Africa being “grey-listed” by the Financial Action Task Force for weaknesses in anti-money laundering controls). This trend demonstrates that regulators are intensifying scrutiny and companies that ignore compliance obligations risk being caught in the dragnet.
Legal risks are not limited to fines. Authorities can suspend or revoke business licences for serious breaches, effectively halting a company’s operations. Certain violations may lead to lawsuits by affected parties or even criminal prosecution of executives. For instance, failure to comply with financial regulations (like anti-money laundering laws or exchange controls) could result in directors being held personally liable or facing criminal charges if wilful misconduct is proven. Non-compliance with safety regulations might expose a company to liability for accidents, while breaches of data protection laws (such as the POPI Act) can lead to regulatory sanctions and civil suits from individuals. In short, ignoring compliance audits creates a blind spot for emerging legal issues that could later explode into full-blown legal crises.
Beyond the direct penalties, the legal fallout of non-compliance often includes lengthy and costly remediation. Organisations may be forced to engage in protracted negotiations with regulators, implement corrective action plans under government supervision, or submit to intrusive external audits after a violation is discovered. These processes incur legal fees and divert management attention for months or years. A U.S. analysis of enforcement actions notes that penalties for regulatory non-compliance come in multiple forms – not just fines, but also limitations on business activities and additional barriers to obtaining approvals in the future. In South Africa, similar patterns are evident: a company that falls foul of one regulation may find its dealings with other regulators becoming more complicated as trust in the company’s governance erodes.
Financial Risks
The financial risks of ignoring compliance are intertwined with the legal risks but extend further. Direct financial costs include the fines and penalties themselves, which can be substantial. However, indirect and hidden financial costs also mount as a result of non-compliance. A landmark study by the Ponemon Institute found that, globally, the cost of non-compliance is, on average, 2.7 times higher than the cost of maintaining compliance. In other words, whatever resources a company thinks it is saving by cutting corners on compliance, it is likely to pay several times over in the event of regulatory breaches. The average cost for organisations that failed to comply with data regulations was calculated at $14.8 million per year, versus $5.4 million for those maintaining compliance – an average difference of about $9.4 million annually. While these figures are global and cover large firms, the principle holds true for South African businesses as well: non-compliance is a costly way to “save” money.
Financial risks also materialise through business disruption and lost productivity. Regulatory actions can force a company to halt certain operations until issues are remedied. For example, non-compliance with environmental or safety regulations might result in authorities issuing a stop-work order or shutting down a facility until it meets standards. The operational downtime leads to lost revenue that can easily dwarf the initial fine. Missed project deadlines and the inability to service customers during a forced shutdown add to the financial toll. Even in less extreme cases, when a company must rapidly invest in remediation to become compliant, those unplanned expenditures can strain budgets and cash flows.
Another hidden financial cost is the impact on insurance and credit. Businesses found non-compliant may face higher insurance premiums, as insurers view them as a higher risk. One analysis noted that companies with a history of violations often encounter increased premiums or difficulties in renewing insurance policies. Lenders and investors, seeing a pattern of compliance failures, might also impose tougher financing terms or withhold capital due to concerns over management competence and risk exposure. All these factors mean that ignoring compliance audits – and thus allowing undetected issues to fester – can gradually increase business costs.
Reputational Risks
While legal and financial damages can be quantified in rand, reputational damage is an intangible yet potentially more devastating risk of non-compliance. Trust and goodwill are crucial assets in South Africa’s competitive market (and indeed globally). A publicised compliance failure can severely damage an organisation’s reputation, leading clients, customers, and partners to lose confidence in the business. For instance, a data breach resulting from poor compliance with data protection laws will not only draw regulatory fines but also scare away customers who feel their personal information isn’t safe. Similarly, a factory cited for environmental non-compliance might face community backlash and negative media coverage that taints its brand image.
Reputation loss often triggers a cascade of financial consequences: customers take their business elsewhere, sales decline, and it may become harder to attract new business. Investors might dump shares, causing a drop in stock valueor hesitate to provide new funding. In today’s instant communication and social media world, news of regulatory breaches spreads quickly. What might start as a local compliance issue could become national news, inviting scrutiny from regulators and the public at large. Companies have found that restoring trust after a scandal is an uphill battle – it can take years of effort and significant marketing/public relations expenditure to rebuild a tarnished reputation.
South African companies are no strangers to reputational fallout from compliance issues. High-profile corporate scandals (such as governance failures at certain state-owned enterprises or private companies involved in fraud and corruption cases) have underscored how deeply non-compliance can erode public trust. Even if a business is not in the headlines, industry insiders talk; non-compliance can lead to exclusion from industry associations or loss of preferred supplier status. In short, ignoring compliance audits courts not only regulatory penalties but also the silent rapture of stakeholder confidence – and once credibility is lost, the business risks a downward spiral of lost opportunities.
Operational Risks
Operational risk from non-compliance refers to the ways in which business processes and continuity can be undermined. One key operational risk is inefficiency and internal disorder. Compliance audits often serve as a health check on internal controls and processes. If these audits are ignored, small control failures or process weaknesses can compound over time, eventually leading to major breakdowns. For example, neglecting regular IT compliance and controls audits may allow vulnerabilities to persist in systems, which can lead to data loss or system outages. In the context of IT, one South African advisory noted that avoiding IT general controls (ITGC) audits can result in undetected security weaknesses, risking cyber-attacks and data breaches, and even operational disruptions like extended downtime. This principle applies broadly: without the discipline of audits, operational flaws remain hidden until they cause a crisis.
Another operational risk is the loss of business agility. If a company suddenly has to deal with a regulatory investigation or implement emergency fixes to comply with an audit finding, management time and resources are diverted from strategic initiatives. Key staff might be bogged down in firefighting mode, addressing compliance failures under duress rather than focusing on innovation or customer service. In heavily regulated industries (financial services, healthcare, mining, etc.), a major compliance breach can lead to partial or complete shutdowns of operations. We have seen instances where banks had to suspend certain product offerings or factories had to cease operations until they could demonstrate compliance improvements. Such interruptions give competitors an edge and can break the momentum of growth.
Operational risk also includes the human factor – employee morale and retention can suffer in a non-compliant organisation. If a company is constantly in trouble with regulators, employees may feel uncertainty about the firm’s stability or become disillusioned by unethical practices. Top talent might leave for more stable employers, and recruitment of quality replacements becomes harder if the company gains a poor reputation. Moreover, a culture that ignores compliance may inadvertently encourage risky behaviour among staff, further increasing the likelihood of mistakes or misconduct that disrupt operations. In essence, non-compliance creates a fragile operational environment where the organisation is one step away from an incident that could have been prevented with proper oversight.
Quick Wins for Enhancing Compliance
Achieving full compliance with all regulatory requirements is a substantial undertaking, but there are several quick wins that South African businesses can pursue to immediately bolster their compliance posture. These are relatively low-effort, high-impact actions that can reduce risk and lay the groundwork for a stronger compliance culture:
- Conduct Internal Compliance Assessments:
An easy starting point is to perform an internal mini-audit or compliance assessment. This does not have to be an exhaustive review – it can target key risk areas of the business. By conducting regular internal audits and risk assessments, companies can identify compliance gaps early and address them before they escalate. Even small organisations can benefit from a basic checklist to review things like licensing, tax filings, labour practices, and data protection measures. This proactive step often reveals “quick fix” items (for example, an expired certificate or an outdated policy) that can be remedied promptly. - Stay Informed of Regulatory Changes:
Keeping up with South Africa’s evolving regulatory landscape is challenging, but there are quick ways to stay ahead. Subscribe to legal and regulatory newsletters or updates from industry bodies to receive alerts on new laws or changes. Many regulatory agencies (such as SARS, the Department of Employment and Labour, or the Information Regulator) provide email updates or website notices. By integrating these updates into compliance planning, businesses can avoid being caught off-guard by new requirements. In practice, dedicating even an hour a month to review compliance news or engaging a consultant for periodic briefings can yield a significant return in preparedness. - Implement Targeted Training and Awareness:
A common weakness in compliance is employees simply not knowing what rules apply to their jobs. Quick wins include short training sessions or workshops focused on specific high-risk areas. For instance, a company can hold a one-day workshop on workplace safety protocols or an hour-long briefing on the essentials of the POPI Act for all staff handling personal data. Ensuring that employees are aware of the regulations relevant to their roles greatly reduces accidental breaches. Regular training and refreshers can be rolled out without huge expense – even leveraging free online resources or webinars provided by legal firms or industry associations. The key is to transform compliance from an abstract concept into concrete do’s and don’ts for everyday work. - Leverage Industry Associations and Peers:
Engaging with industry associations or professional networks can yield quick compliance insights. Often, these groups provide guidelines or best practices tailored to your sector. By participating in forums or discussion groups, businesses can learn from others’ experiences – for example, discovering what common issues arose during recent regulatory audits in the industry, or how peers are implementing new laws. This knowledge sharing can highlight easy measures to adopt. For instance, if peers report that regulators are focusing on a particular compliance issue (say, data security policies), a company can quickly review and update its own policy in that area as a preventive win. - Use Checklists and Simple Tools:
Sometimes the simplest tools are the most effective. Maintaining a compliance checklist or calendar is a quick win that improves organisation and accountability. Mark out key compliance deadlines (tax submissions, licence renewals, audit dates) and responsible persons. Many free or low-cost software tools can help track these tasks. Similarly, document retention systems or spreadsheets to track compliance tasks can ensure nothing falls through the cracks. Adopting even a rudimentary compliance management tool or template can be an instant upgrade from an ad-hoc approach. - Seek Quick Expert Input:
If there is a particular area of compliance that is perplexing (be it a complex tax issue or a technical environmental regulation), a quick win can be to consult an expert for a one-off review or advice session. South Africa has numerous compliance consultants and legal advisors who offer targeted services. Getting an expert to do a “health check” on your company’s employment contracts or data handling processes can identify glaring non-compliance issues. This small investment can prevent far costlier problems down the line. It’s a way of swiftly borrowing expertise to patch weaknesses, especially useful for small businesses that cannot afford in-house specialists.
Implementing these quick wins builds momentum. It demonstrates to internal and external stakeholders that the organisation takes compliance seriously. Quick successes—like passing an internal audit with no major issues or successfully updating all required registrations—can also boost the confidence of the compliance team. Importantly, these wins lay a foundation upon which more comprehensive compliance programmes can be developed, moving the organisation from reactive to proactive compliance management.
Common Pitfalls in Compliance
While aiming for compliance, businesses often stumble into certain common pitfalls. Being aware of these pitfalls is the first step in avoiding them. Below are some of the most prevalent mistakes organisations (in South Africa and globally) make regarding compliance, and why they are dangerous:
- Treating Compliance as a “Tick-Box” Exercise:
One pitfall is approaching compliance with a minimalistic mindset – doing the bare minimum to claim an item is “checked off” without truly embedding good practices. A narrow tick-box approach can result in a false sense of security. For example, having written policies in place does not mean employees enforce or understand those policies. Regulators and auditors can usually tell when an organisation’s compliance programme exists only on paper and is not effective. Such superficial compliance may pass an audit on one day, but it falls apart when tested by real incidents or detailed inspections. Moreover, focusing only on what is explicitly asked by an auditor, rather than the spirit of the law, can mean significant risks remain unaddressed. In short, compliance is not just about documentation but outcomes and behaviours. - Lack of Management Support and Tone at the Top:
Insufficient leadership commitment to compliance is another major pitfall. If senior executives do not actively support and prioritise compliance efforts, it sends a signal to the rest of the organisation that compliance is optional or of secondary importance. A compliance programme lacking visible backing from senior management will have limited effectiveness. This pitfall often manifests as compliance officers or risk managers feeling isolated and powerless to enforce rules. Employees take cues from leadership; if they perceive that management cuts corners or only pays lip service to compliance, they are likely to mirror that attitude. The absence of a strong “tone at the top” can foster a culture of complacency or even misconduct. On the flip side, when leaders champion compliance and model ethical behaviour, it reinforces the importance of adhering to regulations at every level. - Fragmented or Siloed Approach to GRC:
Governance, Risk, and Compliance (GRC) should function in an integrated manner. A common pitfall, however, is to handle these areas in silos – for instance, having separate teams that do not coordinate, each looking at different compliance areas without a unified strategy. This fragmented handling can lead to gaps and overlaps where accountability is unclear. For example, the safety team might assume the environmental team is handling a particular permit, while the environmental team thinks legal is doing it – and in the end, nobody addresses it. When compliance responsibilities are not harmonised, companies might miss critical requirements or fail to see the big picture of their risk exposure. An integrated approach ensures that risk assessments, compliance checks, and governance policies work in tandem rather than at cross-purposes. - Inadequate Record-Keeping and Documentation:
Poor record-keeping is a pitfall that can trip up an organisation even when it attempts to comply. If you cannot prove compliance, you might as well not be compliant in the eyes of an auditor. Many companies struggle to maintain proper records of compliance-related activities. This might mean missing health and safety inspection receipts, incomplete training attendance logs, or lack of documentation on how customer data consent was obtained. Without organised documentation, demonstrating adherence during an audit becomes difficult. Moreover, disorganised records increase the chance of missing deadlines or requirements – for instance, one might forget to renew a licence if there’s no record of its expiry date. In the digital era, regulators often expect businesses to have audit trails. Not having a clear paper (or electronic) trail is a compliance failure in itself. - Ignoring Industry-Specific Regulations:
Businesses sometimes focus only on general laws and forget the niche regulations specific to their industry. This is a pitfall for companies expanding into new sectors or services. Each industry in South Africa has unique compliance demands – e.g. mining has mine health and safety rules, finance has banking and insurance regulations, healthcare has health professions and medicines control rules, etc. Ignoring these specific requirements can lead to serious non-compliance issues. For example, a tech company handling electronic communications must pay attention to ICASA regulations and the Electronic Communications Act; a food producer must heed food safety standards. Overlooking these because they are “not on the radar” of general compliance staff is costly. Industry-specific breaches carry legal risks and can harm the company’s reputation within its sector. - Lack of Employee Training and Awareness:
Compliance is ultimately executed by people, not just systems or documents. A pitfall is assuming staff will “do the right thing” without explicitly being trained on what compliance requires. When employees are not educated about the regulations and policies that affect their work, they may unknowingly commit violations. For instance, if sales staff are unaware of consumer protection rules, they might make misleading claims that lead to legal trouble. Or if IT personnel don’t know the details of data privacy law, they might mishandle personal data. Regular training is often one of the first budget items to be cut when times are lean, but cutting it is a false economy. Lack of training has been identified in compliance reviews as a factor in many corporate compliance failures. Keeping everyone informed through onboarding and periodic refreshers is key to avoiding this pitfall. - Reactive Compliance (Firefighting mode):
Many organisations fall into the trap of addressing compliance issues only after a problem has surfaced. This reactive approach – waiting for an incident or a regulatory notice before taking compliance seriously – is a classic pitfall. It usually results in rushed, sloppy fixes under pressure of enforcement, rather than thoughtful, sustainable solutions. Moreover, being reactive means the damage (be it a fine, a data breach, or an accident) has already occurred. By contrast, a proactive approach would catch issues during routine compliance audits or risk assessments, preventing harm. Companies stuck in permanent “firefighting” mode also experience higher stress, lower morale, and often higher costs, because emergency interventions (like hiring outside experts at the last minute or paying express fees for late filings) are expensive. The goal should be to shift from reactive to preventive compliance management, thereby avoiding the fires in the first place.
By recognising these common pitfalls, organisations can audit their own compliance culture and processes. Are we merely ticking boxes? Do our leaders champion compliance? Is our compliance effort coordinated or fragmented? How good are our records? When was the last time staff got training? Such questions can reveal weak spots. Avoiding these pitfalls is as important as implementing best practices – the two go hand in hand in building a robust compliance framework.
Case Study: Sasfin Bank – A Cautionary Tale in Non-Compliance
To illustrate the consequences of failing to comply with regulatory audits, consider the recent case of Sasfin Bank in South Africa. Sasfin, a well-known South African banking group, faced a significant compliance scandal related to its foreign exchange (forex) business. In 2024, the Prudential Authority (the regulatory arm of the South African Reserve Bank) imposed a hefty fine on Sasfin Bank for historic non-compliance in its forex operations. The case provides a concrete example of how non-compliance can carry multi-faceted costs.
What went wrong?
According to public disclosures, Sasfin had a specialised unit that handled foreign exchange transactions for clients. Over a period stretching back to 2014, a group of employees in this unit colluded with certain clients to circumvent South Africa’s exchange control rules and anti-money laundering (AML) regulations. Essentially, they helped clients move money in ways that violated the law, and in doing so they also bypassed the bank’s internal controls. This indicates not only individual misconduct but also weaknesses in Sasfin’s compliance oversight and audit processes – the controls that should have detected or prevented this collusion were ineffective for years.
The non-compliance eventually came to light, triggering regulatory scrutiny. Sasfin commissioned an external audit investigation when allegations surfaced, which confirmed the wrongdoing. This is a case where an internal compliance audit (albeit prompted late, after allegations) uncovered serious breaches. The regulatory response was swift and severe. In August 2024, Sasfin was slapped with an effective fine of R160.6 million (approximately $8.5 million) for these compliance failures. The fine was originally about R209 million, but a portion was suspended on condition of future compliance – nonetheless, R160 million was immediately payable, which is a substantial hit even for a bank.
Consequences and hidden costs:
The obvious consequence for Sasfin was the financial penalty. A R160 million fine directly impacts the bottom line and shareholder value. However, the hidden costs go much further:
- Reputational Impact:
The case made news in the financial press. For a bank, reputation is everything – clients must trust that their funds are appropriately handled, and regulators must trust the bank’s integrity. Being sanctioned for facilitating illicit financial flows tarnishes Sasfin’s image. Potential clients might think twice about using Sasfin’s forex services, and correspondent banks (international partner banks) could impose stricter due diligence or limits on dealings with Sasfin. Trust, once broken, is costly to rebuild. - Operational and Personnel Changes:
In response to the findings, all the implicated employees were dismissed. While this is necessary for remediation, it also means the bank suddenly lost staff with experience in a specialised unit, which could disrupt service to other clients. The bank had already discontinued the entire forex business unit involved, meaning a loss of a line of business and its future revenues. Internally, the bank’s operations had to be restructured to ensure the offending loopholes were closed. Sasfin’s CEO stated that the bank took steps to bolster its compliance and control functions – this likely involved hiring new compliance officers, investing in better monitoring systems, and overhauling policies. These improvements, while positive, come with significant cost and effort, essentially amounting to remediation costs that a proactive approach might have made unnecessary. - Legal and Investigative Costs:
Beyond the regulatory fine, Sasfin would have incurred legal expenses in dealing with the issue – consulting with lawyers for advice, possibly defending the bank or negotiating the terms of the sanction, and pursuing criminal cases against the dismissed employees. Indeed, the bank indicated that criminal cases have been opened where appropriate. Pursuing those cases involves cooperation with law enforcement and further legal processes. The bank also contemplated appealing the regulator’s decision, which again would mean more legal fees and management time spent in hearings and consultations. - Regulatory Scrutiny and Future Risk:
Having had this lapse, Sasfin will likely be under enhanced scrutiny by regulators for the foreseeable future. The Prudential Authority and Financial Intelligence Centre (which oversees AML compliance) may conduct more frequent inspections or audits of Sasfin. The bank might also face tougher conditions or requirements to meet in order to undertake certain activities. This increased oversight can slow down business agility – for example, any new product or service in the forex space (if they ever try to re-enter it) might require detailed approval and oversight. So, the consequence is not one-and-done; it casts a long shadow on the bank’s operations.
This Sasfin case study underscores how ignoring or failing compliance audits (in this instance, internal controls audits and regulatory AML audits) can lead to a cascading set of negative outcomes. A lapse that continued for years undetected resulted in a regulatory earthquake for the company. Notably, the situation could possibly have been avoided or mitigated if regular compliance audits had been more effective: if, say, routine audits had spotted unusual patterns in the forex transactions, the bank might have caught the rogue employees earlier, and either prevented the misconduct or self-reported it in exchange for leniency. Instead, the problems were only addressed after significant damage had been done.
For other organisations, the lesson is clear. Whether you are a bank, a manufacturing company, or a small business, failing to comply with regulatory requirements – especially when willful or due to negligence – invites severe consequences. The case also highlights that regulators in South Africa are willing to enforce penalties for non-compliance even against established institutions, reflecting a broader commitment to uphold the law and the integrity of the financial system.
Conclusion: A Call to Action for Organisations
The evidence is overwhelming: the costs and risks of ignoring compliance audits far exceed the effort required to conduct them. Non-compliance is a ticking time bomb – it may not explode immediately, but the fallout can threaten an organisation’s existence when it does. South African businesses operate under strict laws and oversight mechanisms, and as shown, regulators are increasingly proactive in enforcing standards. The hidden costs we examined – legal battles, massive fines, operational disruptions, lost revenue, eroded reputation, and diminished stakeholder trust – all serve as warnings that compliance cannot be an afterthought.
Organisations in South Africa urgently need to prioritise compliance audits and related governance processes. This means instituting regular checks and balances: internal audits, management reviews, and external audits where appropriate. It means cultivating a culture where compliance is everyone’s responsibility, championed from the top by leadership and understood by all employees. It also means investing in the necessary resources – whether that is a compliance officer, training programmes, or software tools – to embed compliance into daily operations. Such investments should not be seen as a drain on profits, but rather as insurance against the far greater losses of non-compliance. Indeed, as research has indicated, spending on compliance is ultimately cost-saving since the price of non-compliance can be multiple times higher.
Every organisation, large or small, can take immediate steps following this call to action. Start by assessing where your biggest compliance vulnerabilities lie and address them with haste. Engage with regulators proactively – many South African regulators provide guidance and expect openness and cooperation, which can go a long way in preventing issues or mitigating penalties. Learn from others’ mistakes, such as the case studies and examples highlighted, to avoid falling into the same traps. Most importantly, the mindset should be shifted: view compliance audits not as a burden but as a strategic tool that protects and strengthens the business. A clean bill of health from a compliance audit is a competitive advantage, instilling confidence in investors, customers, and partners.
In conclusion, the hidden costs of ignoring compliance audits are too steep. The stakes – legal, financial, reputational, and operational – are high but within an organisation’s control. By prioritising compliance audits, South African organisations can safeguard their future, build trust with stakeholders, and create a sustainable path for growth. The call to action is clear: invest in compliance now, or pay a far greater price later. The wise choice for any responsible business is to act decisively and embed compliance into the very fabric of its operations, thereby turning a potential source of risk into a foundation of strength and integrity.
Sources:
- Grant Duff et al., The Critical Importance of ITGC Audits: Safeguarding Your Digital Infrastructure, Moore South Africa (14 Aug 2024) – Neglecting IT general control audits can lead to undetected security weaknesses, legal non-compliance, data inaccuracies, operational disruptions, financial misstatements, and reputational damage.
- Peter Merkulov, The True Cost of Compliance, Corporate Compliance Insights (26 Mar 2018)—A study by Ponemon Institute found that non-compliance costs, on average, 2.71 times more than compliance, with $14.8m vs. $5.4m in annual costs due to business disruption, fines, and other factors.
- Eszter Rapanos, FSCA Cracks Down with Nearly R1 Billion in Fines for Non-Compliance, Accounting Weekly (1 Oct 2023)—The Financial Sector Conduct Authority imposed ~R943m in penalties in 2023/24 (up from R100m the prior year) as part of heightened enforcement, including 418 investigations and 1,061 license suspensions, largely for AML and risk management failures.
- RMA Green, The Hidden Costs of Environmental Non-Compliance: More Than Just Fines! (2023) – Non-compliance can lead to operational shutdowns and project delays (lost revenue and missed deadlines), increased insurance premiums due to higher risk profiles, reputational damage with customer backlash and stock value drops, and prolonged legal battles with hefty fees and settlements.
- Moonstone, Sasfin fined R160m for ‘non-compliance’ by discontinued forex business (8 Aug 2024) – Sasfin Bank was fined R160.6m by the Prudential Authority for historic non-compliance in its foreign exchange unit. An audit found employees colluded with clients to bypass exchange control and AML rules, breaching internal controls. The bank dismissed all implicated staff and faced legal consequences and the need to strengthen compliance functions.
- Scrut Automation, Are You Still Making These Common Compliance Mistakes? (28 Jan 2025) – Common compliance pitfalls include poor record-keeping (making it hard to demonstrate compliance and meet deadlines), ignoring industry-specific regulations (leading to legal risks and loss of trust), lack of compliance training for employees (who may unknowingly break rules), and adopting a reactive approach (waiting for violations before acting, which can result in severe consequences).
- Norton Rose Fulbright, Culture and compliance – new best friends? (2018) – Emphasises moving beyond a tick-box approach to foster a culture of compliance. Note that senior management must set a strong tone from the top, as a compliance programme without visible executive support will likely be ineffective. Fragmented compliance efforts and lack of coordination can also undermine overall effectiveness.
- Intersect (South Africa), Navigating Compliance Challenges: A Deep Dive into South African Business (2023) – Recommends strategies like staying informed of legal changes and seeking professional advice, conducting regular training and workshops for staff on compliance duties, and carrying out internal audits and risk assessments to catch issues early. Engaging in industry associations can provide insights to avoid common compliance pitfalls and stay ahead of sector-specific requirements.
