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Letter to the editor: ‘Financial Intelligence Centre (FIC) says closure of bank accounts is a last resort, yet banks persist

Advocate Xolisile Khanyile is executive manager of legal and policy at the FIC. File Photo

Advocate Xolisile Khanyile is executive manager of legal and policy at the FIC. File Photo

Published May 12, 2022

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On February 15, 2022 the Financial Intelligence Centre (FIC) said at its presentation to Parliament’s standing committee on finance that the closing of bank accounts should be a last resort, but the banks in their racist haste instead, rush to close accounts, which undermines the ability of the FIC to do its work in terms of its constitutional and legal obligations.

The FIC elucidated how rushing to close clients’ bank accounts was a premature step arising from political and nefarious reasons, which has nothing to do with the framework as laid out in the law, nor did the agency accept a bank’s explanation that closure was done as a last resort. This was just used to justify and hide the real nefarious reasons to achieve political aims which has nothing to do with the aim to protect our country from money laundering, sanction busting etc.

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The FIC said it had informed the banks that it did not appreciate the process of closing a customer’s account because it would not then be able to freeze funds once an account was closed and the money removed, this injunction by FIC to the banks is totally ignored.

The FIC, whose mandate it is to watch out for signs of money laundering, terror financing and identifying the proceeds of crime, states in its 2016/17 annual report, that the FIC Act does not effectively give banks unlimited power. The act, not banks and other businesses, is the authority on defining what is a domestic or foreign prominent influential person.

It was made abundantly clear that the act does not assume that prominent influential persons are involved in financial crime or associated with illicit financial flows – the risk-based approach serves to protect customers. It also does not empower the FIC or banks to investigate financial crimes or participate in criminal prosecutions. It was this assumption of using “prominent influential persons” as eminently involved in financial crime, which the banks used to personally victimise the person of Dr I Survé.

Further, the act does not invade the privacy and dignity of customers (Section 10 of the Constitution of the Republic of South Africa provides for the right to human dignity: “everyone has inherent dignity and the right to have their dignity respected and protected”. Human dignity is a central value of the objective, normative value system established by the Constitution), nor does it require financial and other institutions to avoid doing business with any category of customers or end their relationships with customers.

These racist banks have conveniently used or rather abused a noble clause in the act to thwart the legitimate aims of Dr Survé to pursue REAL Broad-Based Black Economic Empowerment (B-BBE). We must not forget that this section of the right to dignity was successfully used by Western Cape Judge President Judge John Hlophe in his case against Constitutional Court justices.

Contrary to the racist banks interpretation, the act advocates for a lower administrative burden for most customers when conducting business with banks, and enhanced due diligence for prominent influential persons who might be targets of financial crimes or in a higher risk category than most customers.

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At the standing committee on finance presentation in Parliament, several MPs on the committee raised their concern regarding some regulations and processes currently in place, stating that both the National Treasury and the FIC thought that banks needed to adopt a risk-based approach, as opposed to the current rules-based approach, which created several hurdles for citizens.

It has been found as the finance minister himself pointed out that the banks conveniently attach themselves to their obligations in terms of contract law which give the convenient excuse to ignore their obligations under the FIC Act. The contract which each account holder signs with the bank conveniently gives them the excuse to implement a rules-based approach and thus justify closing certain individual’s accounts instead of using a risk-based approach as envisioned by the FIC Act.

In practical terms the banks’ obstinate reliance on contractual law is frustrating the FIC’s efforts and the citizenry at large. This is all very convenient for the banks when pursuing political and personal motives, which would be difficult to prove in court.

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Advocate Xolisile Khanyile, the executive manager of legal and policy at the FIC, said “large institutions in the country, which were usually listed (such as Sekunjalo), tended to comply with the legislation on financial transactions due to their reputational concerns. Smaller companies sometimes failed to do so, mainly because compliance was burdensome for them.”

Khanyile also mentioned that the verification of a client’s identity in terms of due diligence in “Know Your Customer” was crucial to ensuring that a bank knows where his/her source of income is coming from, and it can also monitor suspicious transactions, which it can then report to the FIC. However, if the bank does not know its client, it cannot do any of this and it is for this reason that the law obliges banks to verify the identity of all account holders.

Finance Minister Enoch Godongwana who has a MSc in financial economics from the University of London, stated that it was NOT FACTUALLY correct that “by law, banks have the right to unilaterally close customers’ bank accounts without providing reasons to those customers”.

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It is clear that the banks in all of them at the same time closing the accounts of one company of which the chief executive is Dr I Survé, have colluded and shared confidential information among themselves. Although it will never be able to be proved, it’s clear that confidential information each of the banks had about Dr Survé and his company were shared between them. This is a clear violation of the banking act and a violation of public trust, which the trusting public is supposed to have in the banks.

It is clear that the banks have selectively interpreted the law to suit their own narrow, parochial agendas which is clearly aimed at obtaining nefarious outcomes. We have always wondered about economic hitmen we read about, we no longer wonder.

It is sheer spite that a bank or banks would collude to thwart the objectives of B-BBEE by shutting down the accounts of Dr Survé and his Sekunjalo group. A successful court action last week in the Equality Court has forced the hand of the banks to keep the accounts open in order for workers’ salaries to be paid. It was a nightmare when workers could not be paid. When the workers could not be paid they could not pay their rent, housing loans and other accounts, incurring heavy penalties on those accounts which would lead to great financial difficulties in the long run.

This relief is only temporary and we do not know how successful the banks will be, as they have heavyweight lawyers from overseas as well to battle their case.

My appeal as a concerned South African patriot is that the Department of Justice needs to modify the existing laws or improve the laws so as to prevent loopholes in terms of interpretation and whether contract law takes precedence over the FIC Act.

We as South Africans cannot stand by and see how our fellow citizens must suffer due to the vindictive action by banks to punish Dr Survé for daring to stand up to crass crony capitalism, taking their orders straight from Stellenbosch.

We owe it to our youth, we owe it to Madiba that youth unemployment is reduced which currently is over 50%. But we can only do this when there is job creation and economic growth. As a country, political freedom gained in 1994 is hollow if there is no economic freedom for our people. Dr Survé promised Madiba he would pursue that vision of Madiba, and for that he is being vilified and targeted by the racist banks even though Judge Willem Heath has vindicated Sekunjalo of any wrongdoing as falsely alleged by Standard Bank and Nedbank. We cannot allow banks to use the law to pursue personal agendas at the cost of the innocent workers who must suffer financially.

As a minister with a masters degree in law in corporate law and a postgraduate certificate in banking law, I am confident that you Minister Ronald Lamola are pre-eminently qualified to steer such legislation through Parliament as early as the next session, as this is very urgent. If a proclamation can be declared even better due to the urgency. We cannot allow WMC to destroy our economy.

A loss of 8 500 jobs at Sekunjalo will directly impact the WC economy, as well as the City of Cape Town, leading to a loss of services to the most vulnerable and the poorest of the poor. We need a growth rate of 3% from the current 1.3% and it won’t be achieved if banks get their desire to close Sekunjalo. We cannot allow banks to form their own Office of Foreign Asset Control, what a cheek they have to act with impunity in the face of existing legislation which they flout in a devious manner.

Masibongwe Sihlahla is a community activist and an independent writer.

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