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Pass the buck: Calls for banks implicated in Zondo Commission to be investigated go unheard

There seems to be a lack of appetite to implement Chief Justice Raymond Zondo’s recommendations that two of South Africa’s major banks should be investigated for participating in dubious business dealings linked to the Gupta family and state capture. Picture: Getrude Makhafola/African News Agency (ANA)

There seems to be a lack of appetite to implement Chief Justice Raymond Zondo’s recommendations that two of South Africa’s major banks should be investigated for participating in dubious business dealings linked to the Gupta family and state capture. Picture: Getrude Makhafola/African News Agency (ANA)

Published May 13, 2022

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There seems to be a lack of appetite to implement Chief Justice Raymond Zondo’s recommendations that two of South Africa’s major banks should be investigated for participating in dubious business dealings linked to the Gupta family and state capture.

Nedbank and Standard Bank have been implicated in the State Capture Commission report as having corruptly benefited from their business dealing with Gupta-linked Regiments Capital. This corrupt dealing cost state-owned South African Airways (SAA), the Airports Company SA (Acsa) and Transnet billions of rand through money laundering and fraud.

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Zondo handed part one of his report, which contains his explicit remarks on the banks’ conduct, to President Cyril Ramaphosa in January, followed by part two on February 1, the third volume on March 1, and the fourth on April 29. The fifth, which is expected to be the final volume, is due in June.

The lack of interest or action in implementing Zondo’s recommendations to investigate these banks seems to be in line with the widespread speculation that the country’s banks are allowed unprecedented freedom to do as they wish in the country. They level unaffordable interest rates against certain people, decisions and metrics apparently based on race, and unbank companies and individuals whom they deem, at their sole discretion, to be a “reputational risk” and despite evidence to the contrary, turn a blind eye to anything that does not suit them.

Some legal and political experts have expressed concern about the way banks act and conduct business, without being held accountable. The Zondo Commission report had, among others things, found that a total of 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 interests “by increasing the margin payable by ACSA to Nedbank and, thus, increasing its 50% share of this margin.”

It also made remarks about Standard Bank concerning a transaction of more than R22m that 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.

“The Acsa interest swop contracts with Nedbank and Standard Bank were procured through the corrupt involvement of Regiments Capital,” read the report.

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Those who have distanced themselves from initiating the process of holding the two banks accountable for their alleged actions include the Ombudsman for Banking Services (OBS) and the Office of the Presidency.

Zondo recommended in his report that the banks should be further investigated because the commission ran out of time before completing its own investigation, including hearing their side of the story. But this has not happened as the Office of the Presidency, which commissioned the Zondo Commission and was handed the report, said it was not its role to investigate the banks.

Instead, Ramaphosa’s spokesperson, Tyrone Seale, said: “May I also suggest that you discuss this matter with the South African Reserve Bank (SARB) under whom the regulation of banks resort.”

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Two years ago, SARB fined Nedbank, Standard Bank, ABSA, and First National Bank a combined total of R125m for failing to comply with the Financial Intelligence Centre (FIC) Act’s directive that they should ensure that the necessary tools to combat money laundering and the financing of terrorism controls were in place.

Banking Association SA (Basa) spokesperson Kwanele Mdletshe said: “Questions regarding the implementation of the recommendations of the State Capture Commission are best addressed by the commission.”

It has been three months now since the release of the state capture report, which contains the part that talks about the two banks’ dodgy dealings, but it seems no one in authority has ever lifted a finger to investigate.

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In trying to establish who should take the responsibility for investigating the banks, Independent Media also approached the FIC, the Zondo Commission, SARB, the national Department of Finance and the OBS. The Department of Finance had not responded at the time of compiling this report.

The OBS distanced itself from responsibility, saying that it only dealt with complaints laid by customers. “Our role is to provide recourse to aggrieved customers of banks in respect of losses that they have suffered or could potentially suffer, owing to maladministration (oversight or negligence or system error) by banks.

“Matters relating to the Zondo Commission recommendations will have to be directed to the regulators such as the Financial Sector Conduct Authority (FSCA) or the South African Reserve Bank.”

The FSCA said it was studying the report “to determine which, if any, parts of the recommendations made therein fall within the scope of what the FSCA is responsible for. At this stage, the Authority is not in a position to provide further details around potential future action or public disclosures on the outcomes of any investigations as the matter is still currently under consideration.”

Without specifically referring to Nedbank and First National Bank, the FIC said it continued its work in respect of the commission’s findings in line with its mandate, “which is to identify the proceeds of crime and assist in combating money laundering and terrorist financing”.

“As per the statement (dated January 4 2022), President Ramaphosa indicated that the way forward would be announced following the receipt of all the reports from the Judicial Commission of Inquiry into Allegations of State Capture, Corruption and Fraud in the Public Sector,” said the FIC.

South African Communist Party (SACP) spokesperson Alex Mashilo said the state needed to have its own system, rather than relying on private institutions to hold the banks accountable if they have been found to have acted inappropriately.

“But if we had a transparent system, everybody would be able to see what was wrong and what the remedial action is because the banks cannot be a law unto themselves. They cannot in one case violate the law and be found guilty of financial misconduct and with them then it becomes life as usual, but when it is Alex Masholo something else applies,” Mashilo said.

When reached, the Zondo Commission’s spokesperson, Sbuyiselo Stemela, did not respond.

Political analyst and legal expert, Mpumelelo Zikalala said banks were biased towards themselves and certain companies that had been found wanting. He said Basa should be proactive by disassociating itself from banks that had been implicated in unscrupulous deals. He said the banks lacked consistency.

“What is their stance when it comes to protecting their reputation if one of their members (in Basa) is implicated in wrong conduct. Yes, it may be that at this stage it is still allegation (against the banks), but also act based on the allegation (against their clients),” he said.

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