Kuben Naidoo. Picture: BLOOMBERG
Kuben Naidoo. Picture: BLOOMBERG

Foreign banks could cancel their correspondent relationships with SA banks after President Jacob Zuma sent the Financial Intelligence Centre Amendment (Fica) Bill back to Parliament, says the Registrar of Banks Kuben Naidoo.

Naidoo and Reserve Bank governor Lesetja Kganyago on Thursday filed affidavits in the High Court in Pretoria in response to the application by Finance Minister Pravin Gordhan for a declaratory order confirming that he does not have the authority to intervene in relationships between banks and their clients.

The Fica bill will result in enhanced scrutiny of all politicians and their family members — described as politically influential people — when they transact through the banking system. It is part of SA’s international commitments to the multilateral Financial Action Task Force that the legislation be updated. The amendment was passed by Parliament in May.

Zuma was lobbied by the Progressive Professionals Forum, headed by Mzwanele Manyi, not to sign the Bill, on grounds that it was unconstitutional. He eventually sent the Bill back to Parliament on November 28 after sitting on it for more than six months.

In his affidavit, Naidoo says that the "referral sets the country back in fulfilling its international obligations to the Financial Action Task Force ... SA’s failure to bring the FIC Amendment Bill into operation will likely result in a negative statement from the FATF that our country’s framework for addressing money laundering and combating financing of terrorism does not meet international standards.

"The statement will require other FATF member countries to re-evaluate the risk of dealing with SA financial institutions given their non-adherence to international standards," he said.

The FATF is due to review SA’s progress in February.

Naidoo also implied that Zuma’s reasons for sending the bill back to Parliament were questionable as the amendment bill placed stricter limitations on warrantless searches than did the original Act passed in 2001.

"Ironically, the current version of Fica provides that all inspections under section 45B of the Act will take place without a warratn. The Bill, by contrast, introduces the requirement that searches must be undertaken with a warrant and only in exceptional circumstances, will warrantless searches be permitted," reads the affidavit.

Kganyago’s affidavit provides details of repeated requests from Oakbay CE Nazeem Howa for intervention by the Reserve Bank to reverse the decision of the banks to close its accounts.

"Howa asked for my help ‘to end the deadly stranglehold’ that the banks had placed on Oakbay business. He implied that because the Reserve Bank has the ultimate responsibility to regulation the financial sector, it should intervene with the banks."

But, continues the affidavit: "Mr Howa is wrong. The Reserve Banks regulation of the financial sector does not extend to relationships between the banks and their clients."

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