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An ironic twist to the tale: Are Standard Bank and Nedbank guilty of money laundering?

The banks, however, as the guardians of our accounts, appear not to be following the money. They have advocated that responsibility to the media. Picture: Timothy Bernard/African News Agency (ANA)

The banks, however, as the guardians of our accounts, appear not to be following the money. They have advocated that responsibility to the media. Picture: Timothy Bernard/African News Agency (ANA)

Published May 12, 2022

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Jamie Roz

South African banks are in the spotlight as many are claiming that they are racist and charge poor blacks higher interest rates than their privileged counterparts.

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They summarily “unbank” black businesses due to so-called “reputational risk”, but do not have to provide any explanation as to why they are closing a bank account. It is also said that the banks have too much power and are lawless.

Yet, while those very same banks have been implicated in money laundering and associating with proven corrupt businesses knowingly, they continue to keep such companies banked.

Ironic, would you not say?

The conduct of the banks is a reputational risk unto themselves.

In an interview that advocate Erin Richards, conducted on a respected business channel recently, she addressed the topic of the accountability and responsibilities of the banks.

She also discussed the Zondo Commission of Inquiry report into state capture, explaining when and how banks should alert the Financial Intelligence Centre (FIC) and the SA Reserve Bank (SARB) to any suspicious behaviour, including suspicions of money laundering.

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Let us look at what money laundering is, simplistically.

According to Investopedia, money laundering is the process of making large amounts of money generated by a criminal activity appear to have come from a legitimate source.

The banks, however, as the guardians of our accounts, appear not to be following the money. They have advocated that responsibility to the media. And as we are already aware, various media houses have their own agendas, one of which, specifically, is to cripple Independent Media, the Sekunjalo Group and ultimately its chairman, Dr Iqbal Survé, in his personal capacity.

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Money laundering is also a serious financial crime that is employed by white-collar and street-level criminals alike. The prevention of money laundering has become an international effort and includes terrorist funding among its targets.

In South Africa, the Financial Sector Conduct Authority (FSCA) is responsible for supervising and enforcing compliance with the FIC Act by authorised users of an exchange, collective investment scheme managers and financial services providers.

The FIC is South Africa's national centre for the gathering, analysis, and dissemination of financial intelligence. The FIC Act effectively produces operational financial intelligence which governs money laundering. In terms of the FIC Act, the Prudential Authority is responsible for the Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT) supervision of banks, mutual banks, and life insurers.

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Since South Africa has all these regulatory bodies in place, what purpose do they serve if the country’s major banks remain in service, even though they are culpable of misconduct, money laundering and racial discrimination?

The reputation of Nedbank and Standard Bank took a big hit when Judge Raymond Zondo mentioned in his full report, the Zondo State Capture Commission, as suspected wrongdoers, but failed to mention if they took any drastic action against the banks or officials.

Nedbank and Standard Bank have been linked to fraudulent activities and are due for further investigation for having a questionable business relationship with Regiments Capital, which involves the Airports Company South Africa (ACSA) and Transnet as their cash cows.

Nedbank and Standard Bank’s reputations also took a major blow when Justice Raymond Zondo mentioned them in his comprehensive report as alleged wrongdoers – but there is no evidence that they have taken serious steps against themselves or their officials. The banks have also received a considerable amount of negative media coverage for their relationship with Gupta-linked Regiments Capital.

Zondo also linked the banks’ questionable behaviour to SAA and Transnet, which were among the reasons the commission was created in the first place and included the investigation of the activities of the Gupta family.

Zondo discovered that Nedbank was entangled in secret deals and interests when bidding for SAA’s transaction advisory services.

The commission also found that more than R35 million had been invoiced by Regiments Capital to Nedbank for various interest swop deals between Nedbank Capital and Acsa, and then Nedbank recovered the money from Acsa over the life of the interest swop transaction.

The report highlighted that Nedbank’s arrangement with Regiments Capital was an act contrary to its principal’s interests, “by increasing the margin payable by Acsa to Nedbank and, thus, increasing its 50% share of this margin”.

It was found that Nedbank representatives Mario Visnenza and Moss Brickman were among people who should be investigated for the alleged contravening of section 6(b)(ii) of the Prevention and Combating of Corrupt Activities Act 12 of 2004. According to the report, those found to have violated the act might be guilty of dishonesty, unauthorised actions, bias, as well as the abuse of a position of authority.

Did you notice the word “might” in the sentence above? This clearly indicates that the banks have not been investigated and might be getting away with money laundering.

The report also stated that the matter required further investigation by the appropriate authorities, as the commission hearings “ran out of time” before listening to Nedbank’s version. What a sad excuse for protecting Nedbank.

Zondo also found that more than R22 million was invoiced by Regiments Capital to Standard Bank in relation to a R1.75 billion interest swop between Standard Bank and Acsa, and then recovered by Standard Bank from Acsa, over the life of the interest swop transaction.

For money laundering and corruption to be successfully conducted, you need to be able to get the money out of the country. The Zondo Commission should have asked more questions.

One of the biggest questions that should have been asked by the commission to Nedbank and Standard Bank, is how they missed those red flags.

The head of financial intelligence at the SARB said it was inexplicable that a bank like Standard Bank did not notice these red flags because it was hallmark money laundering. If it is true the banks have algorithms monitoring these transactions and those algorithms would have noticed that.

When there is a deposit of R20 million into a shell account that has no trading history, and suddenly it is all spirited away within a matter of days into a whole lot of smaller accounts, those are money laundering signs and red flags do not come clearer than that.

Did they miss them and how did they miss them? And why did they wait so long to close the accounts?

Since South Africa has all these regulatory bodies in place, what purpose do they serve if the country’s major banks are not censured, even though they are culpable of misconduct, money laundering and racial discrimination?

These banks have created “reputational damage” to themselves, and none of the regulatory bodies mentioned above has called them to book.

So, on what basis are they able to close the bank accounts of black businesses based on reputational risk if they have already caused such risk to themselves? Yet, the banks have deemed it fit to unbank companies such as Sekunjalo Investment Holdings (SIH) based on unproven reputational risk due to trial by the media.

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