Parliament – National Treasury did not issue a guidance note to financial institutions to perform due diligence on politically exposed persons, deputy director general Ismail Momoniat said on Wednesday as the standing committee on finance's discussions on the Financial Intelligence Centre Amendendment Bill digressed to touch on the Gupta family.
"Treasury did not issue a guidance note, as Treasury does not issue guidance notes," Momoniat said in response to a question from Democratic Alliance finance spokesman David Maynier.
Pieter Smit, the executive manager of legal and policy at the Financial Intelligence Centre, said it was in fact the FIC that did so as there was a gap in existing legislation regarding politically exposed persons. But he noted that a guidance note in itself did not create a new legal obligation on financial institutions. "Guidance notes cannot create legal obligations, only laws can," Smit said.
The question arose after public hearings into President Jacob Zuma's reservations that section 45B (1C) of the bill may be unconstitutional because it allows for searches without a warrant, albeit in limited circumstances.
All participants barring two – the Black Business Council and the Progressive Professionals Forum – deemed Zuma's misgivings unfounded. PPF president Jimmy Manyi, a former Cabinet spokesman, made the extraordinary claim that the bill was an attempt to bankrupt the ruling ANC by blacklisting those who gave it financial support.
Critics of the president however, say they suspect that he sent the bill back to Parliament for review to stall a measure that will strenghten the Financial Intelligence Centre and enable it to dig into his affairs and those of prominent, politically connected figures.
This has added to the impression of a standoff between Zuma and Finance Minister Pravin Gordhan, who filed a court affidavit this week in which he bluntly stated that major banks shut the accounts of the Gupta family's Oakbay Investments because of their links with politically-exposed persons.
Gordhan's founding affidavit was accompanied by a list of 72 transactions, linked to the Gupta business empire and involving almost R7 billion, that the FIC considered dubious.
Oakbay had accused the minister of plotting with the banks to terminate their relationships with the company last year. National Treasury, in a presentation to the committee on Wednesday, recommended that MPs make minor changes to the section flagged by Zuma, in accordance with proposals by Advocate Jeremy Gauntlett, who handled its submission at the public hearings last week, to "neaten" phrasing.
It would eliminate doubts as to the constitutionality of the section and limit the change of a constitutional challenge, he had argued. The bill is aimed at fighting organised crime, and focuses specifically on the laundering of the proceeds of crime.
It imposes obligations on banks to conduct risk management on people designated as "prominent influential persons". In response to wider concerns raised about the bill, National Treasury said it was untrue that the bill would give banks too much power.
It argued that the South African banking system was highly regulated and the pending Financial Sector Regulation Bill would mean greater conduct regulation and also give wider power to the sector's ombudsman.
Once Parliament has approved the recommendations of the committee, Zuma will have two choices. He must either sign the bill, which languished on his desk for half a year after it was adopted by the National Assembly last May, or send it to the Constitutional Court.