FIC ordered to hand over reports
The equality court has ordered that the Financial Intelligence Centre (FIC) hand over reports it has on “suspicious and unusual transactions” by Steinhoff, EOH, KPMG and Tongaat Hulett to a group of black business people, who claim banks discriminate on race when determining which business accounts they close over reputational risk concerns.
The judgment, which is likely to ruffle feathers and raise privacy concerns as the FIC is supposed to protect confidential information from unauthorised disclosures, was handed down on Tuesday.
The applicants, led by Siphokazi Ndudane, are testing the legitimacy and integrity of the financial system and its regulators as they allege that there might be racial bias and double standards in how banks deal with reputational risk and compliance issues.
They asked the court to compel the FIC to hand over “reports of suspicious and unusual transactions made to the FIC by accounting institutions in respect of EOH and its subsidiaries, KPMG SA. Steinhoff International and Tongaat Hulett Development”.
The quartet are often held up as an example of companies that undermined SA’s capitalism. Some were caught in dodgy bookkeeping practices that destroyed shareholder equity.
Others were ensnared in the widespread public sector corruption frenzy under former president Jacob Zuma.
The other reports the FIC must hand over are in respect of Iqbal Survé’s Sekunjalo Investment Holdings, the entities associated with the Sekunjalo Group.
The FIC will also give the applicants in the interlocutory application “reports of suspicious and unusual transactions made to the FIC by accounting institutions” in respect of them.
The other applicants in the interlocutory — a legal term in which a party to the legal proceedings asks the court to make orders to help with their main case preparation — are former trade unionist Dennis George, who has since passed away, and Amvel Moreira. At the time of his death, George sat on the board of Ayo Technology, an entity linked to Survé.
In the main application, Survé is challenging the banks on the closure of companies’ accounts.
Judge DM Thulare said the applicants had made out a case on why they needed the reports, as this would help them determine whether they were unfairly discriminated against, as they allege.
“In my view, the constitutionally entrenched right to equality will be emaciated and hollow if constitutional institutions, upon request, may not supply information on any measures relating to the achievement of equality including where appropriate, compliance with legislation, codes of practice and programmes within their jurisdiction, in instances where such access did not threaten state security or destabilise, in this instance, the nation’s financial system,” Thulare ruled, ordering the documents be handed over within 20 days.
“In this case, the disclosure will help enhance the legitimacy and maintain the integrity of the financial system of our country as it may demonstrate that voluntary compliance and selfregulation is not a cover at the expense of the black majority in that it was exploited to maintain protection based on race and superiority based on political ideology and allegiance.”
The judgment shows that Ndudane’s outfit, TQC Fisheries Management, had its accounts closed by Investec and FNB “due to reputational and business risk”. George took umbrage at Absa closing his account, while Moreira had his business accounts and that of his advocacy NGO Democracy in Action terminated by FNB.
The interlocutory application was brought in terms of the Promotion of Equality and Prevention of Unfair Discrimination Act (Pepuda).
The FIC argued before court that it could not hand over the required documents as Pepuda “did not permit that access to information which included to information which was sensitive, which related to state security, and which contained the personal information of individ
uals and entities”.
Thulare said nondisclosure of the required reports would “allow the foul smell of racism and white superiority to linger around major banks in the republic”.
He added that the disclosure of the reports is in line with the FIC’s responsibilities, including promoting equality.
“This is so particularly for complainants who are disadvantaged by the lack of access to relevant information on how risk is attended to for both black and white business. The constitutional institutions have a responsibility to assist disadvantaged complainants, and if racism exists in our financial sector, it needs the FIC to disclose, and not hide, what it obtained and held.”
The court’s decision also means FirstRand, Investec, Nedbank and Standard Bank will have to give the applicants access to their management and compliance programmes.
The FIC could not be reached for comment at the time of going to print.
Survé said in a statement: “This is a significant victory for us as we have maintained from the beginning that there has been no basis for any of our accounts to be closed, as there is no wrongdoing by any of our companies.”
The Supreme Court of Appeal (SCA) in December set aside an interdict granted against Nedbank by the equality court in 2022 that it cannot close accounts held by companies in the Sekunjalo stable.
Survé and Sekunjalo had argued that the bank’s decision amounted to unfair discrimination on racial grounds.
In that matter, too, the argument advanced by Sekunjalo was that it was treated differently because it was black-owned, while entities such as Steinhoff, EOH and Tongaat were treated with kid gloves even after allegations of fraud against the companies were proved to be true.
The SCA judges said there was no evidence before them that Nedbank behaved in a racist manner.
“Effectively, the respondents’ case rested on no more than an assumption of racial designation. That assumption was insufficient to establish even a prima facie case that Nedbank had treated the respondents, as black customers, differently from white customers,” reads the SCA judgment.
“The equality court compounded the problem by itself expressly assuming, without deciding, that Steinhoff, EOH and Tongaat were white companies. Having done so, it went on to decide the case on precisely this basis.”