CAPE TOWN - The major banks must be regulated by the state to stop them from exercising enormous power to terminate their clients’ banking accounts using unverified information, as they did with Sekunjalo Group.
That is the view of legal expert Advocate Erin Richards who, during a recent interview with BizNews deputy editor Michael Appel, expressed disdain at the behaviour of the banks.
Indications are that the struggle against the banks’ behaviour is gaining much-needed traction from professionals of all racial groups. Others who have criticized the banks are usury expert Emerald van Zyl and Siphokazi Ndudane, a whistleblower and former deputy director-general at the Department of Agriculture.
Richards’s views are in line with those expressed by Mpumelelo Zikalala of the Durban-based Zikalala Attorneys Inc during an interview with Independent Media last week. The views have been expressed in the wake of the closure of banking accounts belonging to the Sekunjalo Investment Holdings (SIH) and related entities.
Sekunjalo and the related entities have approached the Equality Court and the Competition Tribunal in an attempt to interdict the banks from continuing with the move, which is set to affect thousands of its employees and dependants.
Richards told Appel that legally the banks, including the South Africa Reserve Bank (SARB), did not owe their customers an explanation of terminating the accounts, “they can simple terminate”.
Richards said although the “extraordinary powers” that banks have may be necessary to deal with suspicions of money laundering, the abuse of this power “can be disadvantageous to individuals and to corporates”.
She cited the SIH executive chairperson Dr Iqbal Survé as an “interesting” example of how this autonomy power can be abused.
“We see him (Survé) and basically all entities even remotely associated with the Sekunjalo name as having been effectively unbanked by the entire banking system. Now, whether the individual concerned deserves that sanction, is debatable. The fact that the banks have that power is another debate.”
Richards said that instead of the banks taking unilateral actions, they should report suspected companies to the Financial Intelligence Centre (FIC), which should then investigate the matter and if the FIC also suspects irregularities, it should temporarily close the accounts and get monitoring order on those accounts.
“If it found out that there is suspicion of money laundering, it would then report either to South African Reserve Bank (SARB) or to the National Prosecuting Authority (NPA) for prosecution. The SARB also has oversight functions, and it has the ability to instruct banks to close accounts,” said Richards.
She said the power was necessary, but it needed to be properly regulated and managed. “The banks need to be reporting to the regular authorities, there needs to be a proper investigation before accounts are closed. But that entire system seems defunct.”
Appel raised the issue of former Government Communication Information System chief executive Themba Maseko as another victim of the banks’ autonomous power.
After having exposed the Gupta’s state capture, he was classified as a politically exposed person, who “the banks wanted nothing to do with” she said.
“This is the whistleblower who is not able to access the financial system in South Africa. He is considered a saint or a whistleblower by the society (but) suffers the same fate as the Guptas.”
Zikalala slammed the banks for deciding to shut Sekunjalo’s account without giving it a chance to explain itself.
“They would say, ’We have the freedom to decide whatever that we want to decide to protect our reputation. In this case, just because you (Sekunjalo) are associated with something, we are going to chose not to associate with you because we are protecting our reputation’.”
SARB spokesperson Ziyanda Mtshali said the Prudential Authority (PA) does not have the details of clients of any of the banks in South Africa and does not have the authority to terminate accounts of companies and individuals.
She said the relationship between any bank and its clients was a confidential matter and any queries related to those matters should be referred to the respective bank.
“Banks are required, in terms of the Financial Intelligence Centre Act, to report suspicious and unusual transactions to the Financial Intelligence Centre and not to the PA. The PA has been cited as a respondent in the Equality Court case between MI Survé & Others v. ABSA Bank Limited & Others, and will file its answering affidavit in due course,” said Mtshali.
FIC said it could not comment on banks’ decisions in respect of the management of their individual customers. “Furthermore, the FIC is unable to disclose, confirm and/or deny anything about regulatory reports that it may or may not receive, in order to protect the identity of reporters, the subjects of the reports and any other aspects or persons mentioned in the reports.”