Cape Town - South African banks are extremely selective as to how they treat clients they deem a risk to their reputations and quite often there is no reason for their decision to close clients’ accounts.
So said independent banks analyst Corrie Kruger.
Speaking about how banks cited media reports and referred to the Mpati Commission to justify their discriminatory actions against Sekunjalo-related companies, including Independent Media, Kruger said the banks continued to view the PIC Commission Report as a sword hanging over the company’s head, although nothing had been tested or proved in court.
“What is intriguing is that with all the corruption that state-owned entities (SOEs) have been accused of over the years, none of the banks have ever moved to close their accounts. The same goes for all those who were accused of corruption with regards to Covid-19,” Kruger said.
He said banks also liked to portray themselves as institutions with very high moral standards, but often found themselves unable to say no to certain very large and lucrative transactions involving billions of rand and sometimes they looked the other way with regard to certain risks.
Independent Media is challenging Standard Bank’s decision to close its accounts, a move which not only threatens the livelihood of more than 1 400 employees, but could also shut down a critical voice in the country’s media.
Asked about its approach to closing a client’s bank account and whether its processes provided for reasonable notice to a client before termination, Standard Bank said it remained committed to treating its clients fairly.
It said this policy applied to new clients, handling of existing client relationships, and in the event of the termination of any relationship.
“The bank’s policies and processes incorporate principles of natural justice, which includes prior engagement with clients and the provision of reasonable notice,” its statement said.
The bank said it strived to strike a balance between maintaining client relationships, ensuring regulatory compliance, and guarding against any negative perception that may be formed because of activities that the bank was involved in or associated with.
“In line with the legislative requirement to develop and implement a risk-based approach in managing client relationships, the bank has established risk management principles in terms of which it monitors, on an ongoing basis, regulatory and reputational risks that association with any client may pose.”
Accusing banks of operating unfair policies, Chief Justice Raymond Zondo, in his State Capture report, said it was unfair that they could simply give a client reasonable notice of termination before closing their accounts.
“In this day and age in South Africa, it is unacceptable that an institution as powerful as a bank should have no obligation to hear … what a client has to say before the bank may close that client’s account on suspicion that the client may be involved in illegal or corrupt transactions.
“In our legal system, even those who are accused of rape and murder are not sent to jail without being given an opportunity to tell their side of the story. There is no reason banks should not be required to observe this basic principle,” Zondo said.
The Ombudsman for Banking Services Code of Banking Practice said a bank would not close an account without reasonable prior notice.
“A bank however reserves the right to protect its interests at its discretion, and this might include closing an account without giving prior notice if a bank is compelled to do so by law,” it said.