SA faces global banking exit
IF PRESIDENT JACOB ZUMA DOESN’T SIGN THE AMENDMENT SPEEDILY, WE WILL BE AFFECTED
The global Financial Stability Board (FSB) chose Cape Town as the venue for one of its regular plenary meetings this week and one of the aspects of its work that is particularly topical for SA is correspondent banking.
The board, set up during the 2008 global financial crisis, brings together 24 countries (including SA), that account for more than 90% of the world’s financial assets and monitors any risks to global financial stability.
One concern that has emerged in the past couple of years is that there has been a global decline in correspondent banking services and many emerging-market countries are losing access to these.
These are the arrangements banks have with counterparties in other countries and they matter a great deal in terms of individuals’ and companies’ ability to trade and transact across borders.
As the FSB put it last year: “Losing access to correspondent banking services affects the ability to send and receive international payments, which is essential for companies to finance trade and individuals to send remittances.”
That is a big problem for economic growth and for people’s ability to be included in the financial system — migrants’ ability to remit money to their families at home, for example. The FSB is worried too about the implications for the stability of the banking system, and the financial system more generally, if losing access drives payment flows underground, where they are harder to regulate or monitor.
Last year, a World Bank survey found that banks in more than half the countries, had experienced a decline in correspondent banking relationships, while most large correspondent banks had reduced the number of other banks they dealt with.
What’s more, an increasing number of countries are being affected. The FSB is finding that, often, the big global banks are uncomfortable doing business with a single bank within a country, or a single country within an emerging-market region — but might pull out of doing business with the whole country or the whole region. Why does this matter for SA? With “know your customer” and antimoney-laundering and antiterror-financing regulations getting tougher, big banks just can’t take the risk of dealing with counterparties that don’t have adequate “know your customer” compliance, and with countries that don’t have adequate anti-money laundering and antiterror-financing legislation.
Fortunately, SA and its banks have not been affected by the pullback of correspondent banks. But just wait: if President Jacob Zuma doesn’t sign the amendment to the Financial Intelligence Centre Act speedily, we soon will be.
In any event, as citizens we should be supporting any measures that will ensure SA doesn’t become a haven for money launderers or terror financiers. But the Financial Action Task Force (FATF), of which SA is a member, insists that countries have the right legislation in place. If they don’t, they are blacklisted and correspondent banks will steer well clear.
Parliament has now again passed the amended legislation, unanimously. The Guptas don’t like it because concerns about their transactions were the reason the banks booted them out as customers. Mzwanele Manyi’s Progressive Professionals Forum doesn’t like it either, nor does the Black Business Council, and they prevailed on Zuma last year to refuse to sign it and dramatically change it. The parliamentary committee did its bit with a minor amendment that should tackle any constitutional concerns. And the FATF has given us another three months to comply — or be blacklisted.
It is now up to Zuma to sign the legislation. If he does not, SA faces financial isolation.