A branch of VBS Mutual Bank in Thohoyandou, Limpopo. Picture: Antonio Muchave
A branch of VBS Mutual Bank in Thohoyandou, Limpopo. Picture: Antonio Muchave

When investigators appointed by the Reserve Bank and led by advocate Terry Motau entered the doors of Vele Investments in May, they were acting in terms of powers conferred by the recently passed Financial Sector Regulation (FSR) Act of 2017.

Vele Investments was the major shareholder in VBS Mutual Bank, which was recently placed in curatorship following what the Bank called a "severe liquidity crisis".

Investigators were seeking to obtain evidence that would help in understanding what had transpired at the bank, including investigating potential fraud.

Kuben Naidoo, deputy governor of the Bank, confirmed that the forensic investigation under way at VBS Mutual Bank through the appointment of investigators was being conducted using the powers afforded by the new act.

'Reasonable suspicion'

These powers require nothing more than a "reasonable suspicion" regarding a contravention, or possible contravention, of a financial sector law as the basis on which to execute a search and seizure operation. This notably includes any suspected contraventions of the Insider Trading Act that have traditionally been notoriously hard to prove.

Search and seizures can be conducted in two formats in terms of the act. Investigators can enter premises if consent is given at the place of business by a person in charge.

But the powers of the new act mirror the Financial Intelligence Centre Amendment (Fica) Bill, which provides for a more liberal ability to enter premises without consent and without a warrant.

"The same wording that was included in the Fica Amendment Act was also placed in the FSR Act. For our needs, it’s possible to go to a judge and obtain a warrant establishing just cause, as we did in the case of Vele Investments," says Naidoo.

With merely "authority" from a financial sector regulator or delegated senior staff member, an investigator can enter premises if they "believe" that a warrant will be issued in accordance with the law.

Alternatively, investigators are also empowered to do so if a delay in obtaining the warrant is likely to defeat the purpose for which entry of the premises will be sought.

"The issue of warrantless searches was an important topic when the Fica Amendment Bill was being discussed," says Naidoo. "It was the reason the bill was sent back to Parliament by the president on constitutional grounds. It is only in specific circumstances that warrantless searches can be conducted."

Investigators can also, through a written notice, require any person who is believed to be able to provide more information to appear before the investigator and answer questions under oath.

This extends to being able to request people to present documents or items.