New Fica is just waiting for Gigaba
It’s feared the Guptas are benefiting from delays in activating a new law to curb financial crime
All eyes are on Finance Minister Malusi Gigaba’s next telling move: Will he delay implementing new legislation that makes it harder for crooked politicians and businesspeople to move their ill-gotten gains, or will he roll out this corruption-fighting weapon with the urgency it requires?
A series of extraordinary delays in signing the Financial Intelligence Centre Amendment Act into law has been a source of anxiety for treasury officials. Under the leadership of Pravin Gordhan, the treasury had managed to secure an extension from the Financial Action Task Force — an international body tasked with combating money laundering — to comply with its requirements, which are addressed in the amended Act.
The task force is due to meet in two weeks’ time, and it appears highly unlikely that South Africa will be able to show any progress in implementing the amendments that will strengthen the country’s ability to fight financial crime.
The treasury has been curiously quiet about when and how it will implement the Fica Act, amid calls from civil society, opposition parties and the Banking Association for it to get a move on.
Treasury deputy director general Ismail Momoniat said this week the department was working to implement the amended Act urgently. Being labelled as noncompliant by the task force would have severe repercussions for South Africa’s banking sector, making it much harder and costlier to clear transactions with banks in other countries.
President Jacob Zuma delayed the passing of the Bill for more than a year. On April 29, after being threatened with legal action by civil society, he finally signed it into law. Now Gigaba must determine a date on which the legislation commences and gazette it.
There is growing concern that the delays have been intentional to buy time for politically connected rent seekers to move money around, unencumbered by the firmer provisions of the amendment Act.
A recent report by the Public Affairs Research Institute noted more than R10-billion in known outflows from Gupta-linked accounts since 2012. Between April and September last year alone, R3.37-billion reportedly flowed to a group of Hong Kong companies.
The Reserve Bank’s registrar of banks, Kuben Naidoo, has been vocal about the importance of the Fica Act because it requires enhanced due diligence when entering into a business relationship with a politically exposed individual, dubbed a “prominent influential person” or “pip”.
If an accountable institution regards a customer as a pip, it must decide whether the customer brings higher risk. If so, then it must determine, among other things, the source of the customer’s wealth and funds, and monitor the account for transactions that seem anomalous.
The amendments also apply to immediate family members of such individuals, as well as their known close associates.
Last April major banks began shutting down Gupta-linked accounts even though the amendment Act had not yet been passed. The Guptas lobbied then finance minister Gordhan to intervene; he approached the courts for a declaratory order to say he could not intervene in matters relating to banks and their clients. Gordhan’s founding affidavit revealed the Financial Intelligence Centre had flagged 72 transactions relating to the Gupta accounts as being suspicious — implying this may be why the banks cut them off.
Amid growing calls for Gigaba to implement the amended Act urgently, he has remained silent.
This week Corruption Watch sent a letter to Gigaba to ask when the FIC amendment Act would come into force, and requested a response by June 9.
“Gigaba’s been there for a while and this is incredibly urgent; if we are deemed noncompliant, it’s tantamount to a sort of a downgrade. It puts correspondent banking arrangements into jeopardy,” said Corruption Watch director David Lewis. “It’s really serious. I would have thought Gigaba would have given much of his attention to getting this done ... The timeline reflects the urgency of the issue. If we don’t get a satisfactory response, we will investigate the possibility of further action.”
Lewis said he feared that simply signing the Act into law would not impress the Financial Action Task Force.
The Democratic Alliance’s spokesperson on finance, David Maynier, said: “I suspect that the minister of finance, Malusi Gigaba, is up to something when it comes to the Financial Intelligence Centre.
“Several weeks ago, he promised to announce a road map for the implementation of the Financial Intelligence Centre Amendment Act. However, since then absolutely nothing has happened and there has been complete radio silence.”
Gigaba’s appointment to head up the country’s treasury at the end of March was met with criticism and concern. On the day he took over,