What the #FIC is go­ing on?

Ob­jec­tions to an anti-money laun­der­ing bill puts SA at risk of be­ing booted out of global bank­ing sys­tems, writes Fe­rial Haf­fa­jee

CityPress - - Business -

Af­ter he died, it turned out that for­mer Nige­rian strong­man Sani Abacha had $4.5 bil­lion (R63.5 bil­lion) in his Swiss bank ac­count – per­haps the most jaw-drop­ping ev­i­dence of loot­ing on our con­ti­nent, but not the only one. Un­til global rules on money laun­der­ing were crafted, the canon of se­crecy that gov­erned banks, es­pe­cially Euro­pean and Swiss banks, was wa­ter­tight.

It changed af­ter the 9/11 at­tacks on the World Trade Cen­ter in New York, when gov­ern­ments pushed to pierce the veil of se­crecy to en­able them to trace the fund­ing of global ter­ror.

Money laun­der­ing pacts also al­low coun­tries to crack down on Mafia ac­tiv­i­ties and drug car­tels.

The Fi­nan­cial Ac­tion Task Force was es­tab­lished in the 1990s to co­or­di­nate and strengthen ef­forts to com­bat money laun­der­ing.

Says Trea­sury’s deputy di­rec­tor-gen­eral, Is­mail Momo­niat: “As Africans, we have a big stake in this [anti-money laun­der­ing pro­to­col]. It en­sures that funds from Africa are not taken out il­lic­itly to Euro­pean and other banks.”

Where did that money come from?

The sys­tem works on the as­sump­tion that in­ex­pli­ca­ble money flows are as­sumed to be il­le­gal.

To en­sure South Africa’s com­pli­ance, the ANC-led govern­ment joined the task force in 2003 and passed the Fi­nan­cial In­tel­li­gence Cen­tre Act (Fica) to com­ply with best prac­tice in fol­low­ing hot money.

Now it re­quires a fur­ther amend­ment to make it com­pul­sory for banks to scru­ti­nise what are called “po­lit­i­cally ex­posed per­sons”, or PEPs.

Abacha, for ex­am­ple, would have been marked as a PEP and his ac­counts put on height­ened alerts. This would have saved Nige­ria’s fis­cus. Fifa boss Jack Warner was caught with his ill-got­ten foot­ball gains when his sons tried to de­posit cash, which set off sus­pi­cious ac­tiv­ity re­ports.

Zuma: It’s un­war­ranted

This week, Pres­i­dent Jacob Zuma sent the amend­ment by the Fi­nan­cial In­tel­li­gence Cen­tre (FIC) back to Par­lia­ment, say­ing it did not pass con­sti­tu­tional muster as he was con­cerned about pro­vi­sions for searches with­out war­rants.

In Novem­ber, the Coun­cil for the Ad­vance­ment of the SA Con­sti­tu­tion filed pa­pers in the Con­sti­tu­tional Court to force the pres­i­dent to act on the fi­nan­cial in­tel­li­gence law.

By send­ing the draft law back to Par­lia­ment, Zuma avoided an­other case be­ing brought be­fore the high­est court. Also last month, the ANC’s na­tional ex­ec­u­tive com­mit­tee said the bill should be passed as soon as pos­si­ble to pre­vent our bank­ing sys­tem fall­ing foul of global rules. Mzwanele Manyi, the pres­i­dent of the Pro­gres­sive Pro­fes­sion­als Fo­rum, has been a vo­cal lob­by­ist against the draft law. Tele­vi­sion sta­tion ANN7, which is owned by the Gupta fam­ily, has also cam­paigned against it. The fam­ily’s ac­counts are likely to face in­creased scru­tiny as the new draft law makes pro­vi­sions to red flag the ac­counts of for­eign ex­posed per­sons. The Gup­tas fit this def­i­ni­tion be­cause of their prox­im­ity to Zuma. The leak of the Panama Pa­pers was an ex­posé of one com­pany’s man­age­ment of pri­vate ac­counts in Panama, but its rip­ple ef­fect was to make peo­ple around the world op­posed to se­crecy in bank­ing. “Tax crimes, money laun­der­ing and il­licit flows are part of a com­plex set of phe­nom­ena, which are un­der­min­ing good gov­er­nance, eth­i­cal pol­i­tics and gov­er­nance, and civil so­ci­ety pro­grammes,” said Fi­nance Min­is­ter Pravin Gord­han at a con­fer­ence on il­licit fi­nan­cial flows ear­lier this year. He con­tin­ued: “The fo­cus of PEP in the FIC amend­ment bill does not seek to un­fairly ex­clude hon­est, law-abid­ing cit­i­zens from the fi­nan­cial sec­tor. Rather, it seeks to place a greater obli­ga­tion on fi­nan­cial in­sti­tu­tions to en­sure their due dili­gence is strong enough to prop­erly un­der­stand the source of funds or the wealth of such in­flu­en­tial per­sons, and in this re­spect seeks to re­duce the scope for funds to move il­lic­itly.”

Banks im­per­illed

It took a full year to pass the draft through both houses of Par­lia­ment, af­ter nu­mer­ous com­ments from in­dus­try and the pub­lic in the pe­riod open for pub­lic com­ment.

The banks do not like the laws as they make cus­tomers ner­vous and in­clude lots of new red tape, but this is the price of do­ing busi­ness in a global econ­omy.

Cas Coova­dia, the CEO of the Bank­ing As­so­ci­a­tion of SA, said the in­dus­try be­lieved the law should be passed.

South Africa is likely to miss a Fi­nan­cial Ac­tion Task Force dead­line to make the re­quired le­gal changes.

This means our FIC law is now dated and places South Africa’s banks at risk, while global au­thor­i­ties on anti-money laun­der­ing say that South Africa’s anti-money laun­der­ing sys­tems are poor. South Africa risks a mo­tion of cen­sure from the task force and its banks, which puts it at risk of be­ing booted from ac­cess to the global bank­ing sys­tem.


PRES­I­DEN­TIAL PREDICA­MENT Mem­bers of the Korean Con­fed­er­a­tion of Trade Unions carry an ef­figy of South Korean Pres­i­dent Park Geun-hye in cen­tral Seoul on Wed­nes­day dur­ing a gen­eral strike call­ing for Park to step down

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