STANDARD Bank, among other banks, may have breached the law when it failed to act after the global financial crime watchdog found that South Africa had become a high-risk country after failing to address strategic inadequacies to combat money laundering and terrorist financing.
South Africa remains greylisted by global financial crime watchdog the Financial Action Task Force (FATF) for not fully complying with international standards around the prevention of money laundering, terrorist financing, and proliferation financing.
But despite the existing potential reputational risk, the banks as compelled by the regulatory authority are taking it upon themselves to close bank accounts instead of reporting suspicious activity to the Financial Intelligence Centre, (FIC) in line with the FIC Act.
According to Standard Bank’s general terms and conditions on the closure of a client’s account, the banks are compelled by the FIC Act to report an account if “you are in breach of applicable laws; if your conduct or the conduct of any person you are related to does not align to Standard Bank’s values, or a continued relationship with you may expose the bank to perceived reputational or operational risks and If we know or reasonably suspect that you are engaging in prohibited activities”.
Additionally, Standard Bank is expected to report suspicious accounts to the FIC if the bank “believes or have a reasonable suspicion that a product is being used for any prohibited activities” and if the bank “believes or have a reasonable suspicion that your operation of any product directly or indirectly benefits a sanctioned entity”.
In explaining the greylist implications, Investec digital content team wrote that: “While the grey list is designed to improve international safety and security by curbing money laundering and the financing of terrorism and proliferation, it can have indirect implications for a country’s international reputation, financial system, and economy, and can affect foreign investment, access to international financial services, and long-term prosperity,” read the statement issued on March 1, 2023.
Asked about Standard Bank’s lack of action despite the existential red flags, Standard Bank spokesperson Ross Linstrom disputed that South Africa was greylisted.
“Standard Bank takes its legal obligations both locally and internationally extremely seriously and is committed to cooperating with any investigation conducted by mandated authorities. Standard Bank assesses the money laundering and terrorist financing risk introduced by each client on an individual basis. Standard Bank has met all its regulatory obligations in this regard and is not at liberty to discuss individual client relationships, which remain confidential.
“As a point of correction please note that the government of South Africa has not been ‘grey listed’.” The country (as a whole) was designated as a “jurisdiction under increased monitoring”. With this designation, the FATF does not call for the cutting-off of entire classes of customers. The expectation from the FATF is that members will take this into account when applying a risk-based approach to managing client relationships,” said Linstrom.
Linstrom’s assertion that South Africa is not greylisted is completely inaccurate as the FSCA and other agencies did acknowledge that the country was in fact greylisted. On March 1, 2023, Investec also wrote on its website announcing that the country had been officially greylisted.
Furthermore, the FSCA, in its response to the Falcons made an admission that the country was placed on greylisted and that the FSCA was part of the coordinated national effort, made up of various agencies, to address the issues relevant to greylisting as identified by the FATF led by the National Treasury.
President Cyril Ramaphosa says that South Africa being added to the FATF’s global grey list was concerning, but “less dire” than some suggest.
The Financial Sector Conduct Authority (FSCA) which is the South African financial institutions’ market conduct regulator and a successor agency to the Financial Services Board said that it was part of a coordinated national effort, made up of various agencies, to address the issues relevant to greylisting as identified by the FATF.
On the specific matter of the approach of banks in terminating the accounts of certain individuals and entities, FSCA refused to comment.
“The FSCA is unable to comment further at this point due to this being the subject of various litigation processes. You may also engage the Banking Association South Africa (BASA) directly for their response to your questions.” read the FSCA media response.
BASA did not respond to questions from the Falcons sent on Tuesday.
South Africa’s leading banks have become increasingly under the spotlight for playing into the political gallery and applying double standards in their exercise of the power they wield.
In a glaring move that had tongues wagging, the banks have seen fit to unbank companies such as Independent Media based on unproven reputational risk due to trial by the media.
However, the Competition Appeal Court found no evidence that the banks had directly coordinated with each other.
This has threatened the job security of an estimated 1 600 media workers employed by Independent Media and related entities.
Sunday Independent