Cabinet should not get involved

Global rules bind banks on clients like Guptas

THE Gupta family’s Oakbay Investments has taken to publishing newspaper advertisements challenging the CEOs of SA’s big four banks to restore services to the company. “Do the right thing,” the advert says and claims that the livelihoods of 7,500 employees and dependants were “in the hands” of the CEOs, so to speak.

Oakbay has mounted a concerted campaign since it became public that the banks had distanced themselves from the company, which is a vehicle for the Guptas, the family with close ties to President Jacob Zuma and his family.

Oakbay and the Gupta family are entitled to question the banks, just like any other client is. But what is of concern is a Cabinet decision, delegating three ministers to “engage” with the banks on the matter.

Performance Monitoring and Evaluation Minister Jeff Radebe did not adequately explain why that was decided, merely saying the Cabinet was concerned the move could deter potential investors.

How exactly, and why, he did not say.

Finance Minister Pravin Gordhan, Labour Minister Mildred Oliphant and Mineral Resources Minister Mosebenzi Zwane were the ones tasked with talking to the banks.

But, it has since emerged that neither Mr Gordhan nor Ms Oliphant were in attendance at the meeting.

Mr Gordhan has made his aversion to state capture clear and we believe asking him to intervene on behalf of the Guptas would have been awkward, to say the least.

But the fundamental issue is that the finance minister is the ultimate regulator when it comes to the soundness and integrity of banks and the stability of the financial system.

He also oversees the regulatory framework that falls under the Financial Intelligence Centre Act (Fica) that is designed to detect and prevent money laundering; bribery and corruption; the financing of acts of terrorism; tax evasion or any other dodgy financial dealings.

The Reserve Bank implements those regulatory frameworks, along with the Financial Intelligence Centre. It would, therefore, be inappropriate for the minister or the Reserve Bank to get directly involved in client relationships. Their task is to ensure that banks manage their risks in ways that align with the increasingly complex global rules made in forums such as the Financial Action Task Force, of which this country is a member.

Those rules require banks and other institutions, such as law firms, to exercise caution when they deal with clients that could be high-risk.

The “know your client” requirements of the Fica are familiar, but the global standard adds extra dimensions when it comes to “politically exposed” clients. They include cabinet ministers, provincial, local or other senior government officials, their friends and relations and close business associates.

New Financial Intelligence Centre amendment legislation will formalise the requirements and adds a peculiarly South African concept — the politically influential person — who could influence the awarding of government contracts.

Banks have to monitor such persons carefully and if the risk is too high, or the client’s compliance too low, they should opt to not bank them.

Presumably, the Gupta family members fall within this ambit.

The question is whether banks are equally vigilant with other clients who may be up to no good, even if they are not high-profile clients.

Everyone deemed at risk should be scrutinised carefully as required by the law. The banks should not discriminate against those who make the news or are at the losing end of political battles. And the regulators must ensure they are even-handed.

That, surely means not getting involved in a client-bank relationship.

Mr Gordhan has made his aversion to the Guptas clear and asking him to intervene would have been awkward