A NEW law that will result in scrutiny of all politicians and their family members when transacting through the banking system has stalled on the desk of President Jacob Zuma, who is being petitioned not to sign it into law.
The Financial Intelligence Centre (FIC) Amendment Bill will require banks to perform enhanced due diligence on the "politically exposed" in line with international obligations.
It is these provisions that are already being applied by banks responsible for the withdrawal of banking services for the politically connected Gupta family and its companies.
In a related development, there is discussion in government circles including in the Cabinet that the FIC, which monitors suspicious as well as cash transactions above a certain threshold, be moved out of the Treasury and become part of the government’s security cluster.
The suggestion is contained in the Cabinet memo submitted by Mineral Resources Minister Mosebenzi Zwane to the Cabinet for deliberation.
The developments form part of an orchestrated attack by parts of the government and the ANC aligned to Zuma on the Treasury, Finance Minister Pravin Gordhan and the Reserve Bank, with a view to clipping their independence and powers.
The bill will result in enhanced scrutiny of all politicians and their family members, when they transact through the banking system. A delay in passing the bill into law means SA is likely to be noncompliant with its international obligations by the time it is reviewed in February 2017.
Parliament passed the FIC Amendment Bill in May and it now awaits the president’s signature. On Saturday, spokesman for the president Bongani Majola said that the signing had been delayed as the Progressive Professionals Forum, a lobby group established by former government spokesman Mzwanele Manyi, had raised concerns over its constitutionality.
During the processing of the bill in Parliament, which also allowed for a period of public comment, no constitutional issues were raised or debated.
But in its letter, sent in July, Manyi argues that the bill violates the Constitution in four instances: in a general way, as it fails to recognise the Constitution as the supreme law of the land; it undermines the privacy provisions of the Bill of Rights, which includes the right of a person not to have their home searched; it violates freedom of association; and it violates the right to free economic activity.
Manyi appealed to Zuma to subject the amendments to a constitutional test at the Constitutional Court.
He says: "Government should not surrender/abdicate to the banks its rights to protect the citizens of this country from any illicit financial dealings."
"Banks should not be allowed to be prosecutors, judges and executioners at the same time. Banks do not have the moral authority to be entrusted with this responsibility."
The amendment bill has its origins in SA’s membership of the Financial Action Task Force (FATF), a UN-based body of 198 member countries that has a mandate to stop illicit flows of money, particularly money laundering and money used to finance terrorism. It seeks to bring SA in line with new task force provisions, chiefly the need for enhanced due diligence of politically exposed people, and the obligation on banks to determine the beneficial owner — the natural person — behind a transaction or entity.
Deputy director-general in the Treasury Ismail Momoniat said Manyi’s group had not commented during its passage through Parliament, nor was its constitutionality raised.
"Our view is that the bill is constitutional, and, in fact, does not deny any rights of individuals, but rather takes measures to fight corruption through better ‘Know Your Customer’ obligations not only on banks, but most financial institutions and other reportable sectors, [such as] estate agents."
"We are already on a targeted watch-list at FATF, and have to have not just the bill, but the regulations, all in place when we report to FATF in February next year. So, any delays in implementing internationally accepted standards will only do harm to the economy, and expose our financial institutions to sanctions or fines from overseas regulators," he said.
"The bill is a powerful tool to deal with illicit flows, as it requires that a customer always show the source of their funds.
"Preventative anti-money-laundering measures are an essential tool in the fight against corruption," Momoniat said.
A second line of attack on the FIC is a bid by pro-Zuma ministers to move it into the intelligence cluster. The FIC monitors all cash transactions that are larger than R25,000 and reports any suspicious activity to the law enforcement agencies.
In his memo last week that he claimed constituted a Cabinet decision, Zwane suggests that the "reporting structures" of the FIC should be reconsidered and the FIC Act should be examined by a judicial commission of inquiry.
Internationally, similar bodies to the FIC are almost without exception either part of a treasury or are situated within the central bank. Relocating the FIC to an intelligence ministry would most probably be viewed as a red flag by international banking regulators and bodies.
The amendments spent a year in the Cabinet process before coming to Parliament earlier in 2016. The Cabinet debated the concept of a politically exposed person at length, resolving that enhanced due diligence should not apply to politicians and their families only, but also to those in the private sector who do business with government.
The bill is, therefore, even broader than international requirements and uses the definition of "politically influential people" in order to include the private sector.
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