IN THE current political environment of media leaks and vendettas, it is perhaps surprising that no one in the media has managed to find out exactly why it was that Barclays Africa decided to close the bank accounts of the Gupta-owned Oakbay Investments.
One reason is that among what seems like chaos and the gradual disintegration of the state, the integrity of SA’s banking institutions is holding strong. The other was the reinstatement of Pravin Gordhan as finance minister.
I suspect the banks were uncomfortable with some of the transactions in the Oakbay accounts for some time prior to their decision to sever ties. In terms of the Financial Intelligence Centre Act (Fica), banks are required to report any suspicious and unusual transactions to the Financial Intelligence Centre.
Although there is no evidence to suggest there was anything untoward about the Oakbay accounts, there have been several suggestions that Oakbay has been involved in corrupt or criminal activities, and that this would have been reflected in their bank transactions.
I found it particularly telling that when asked about the findings of the ministerial "task team" that was asked to investigate the closure of the Oakbay accounts, Planning, Monitoring and Evaluation Minister Jeff Radebe responded that the decision to form the task team was made earlier in April, before it emerged that one of the reasons for the banks’ actions could be compliance with money-laundering regulations.
Things only got worse as the extent of the Gupta’s close relationship with President Jacob Zuma became fully apparent — especially the claims made by Deputy Finance Minister Mcebisi Jonas and former ANC MP Vytjie Mentor that the Guptas had approached them and offered them top Cabinet positions.
Now, there was no question of the relationship between the Guptas and the state, and it was clear that the Guptas could be considered what is known in financial regulation parlance as "politically exposed persons" (PEPs) — worthy of even closer financial scrutiny.
According to the South African Institute of Professional Accountants, a PEP is someone who holds or has in the past held a position of public trust, such as government officials, senior executives of government corporations, politicians, and important political party officials.
These people are of particular interest to antimoney-laundering institutions, such as the Financial Intelligence Centre, because as a result of their position, they have easier access to public funds and carry a higher risk with regard to their potential for involvement in bribery and corruption.
The centre requires that banks treat PEPs as "high-risk clients" and must, therefore, take additional measures with regard to monitoring their transactions, obtain senior management approval before taking them on as clients, and take reasonable measures to establish the source of their wealth and the origin of funds going into their accounts.
What is interesting, is that the centre also includes the families and close associates of someone who holds a position of public trust in their definition of a PEP. This would mean that as the Gupta story unfolded, it would be impossible for the banks not to apply the more stringent Fica requirements to them personally, or any business interests they might have.
As someone rather crudely put it to me, "banks have a tendency to sail close to the wind, but they’re remarkably law-abiding when their banking licence is under threat".
I suspect, even for bankers, it had become impossible to continue their relationship in good faith, but the political climate made it very risky from a business point of view to act in accordance with duties.
As well as Fica, the banks also have a duty to report knowledge of corrupt activities under the Prevention and Combating of Corrupt Activities Act. According to the act, any person who holds a position of authority and knows or ought reasonably to have known or suspected that any other person has committed an act of corruption involving an amount of R100,000 or more must report such knowledge or suspicion or cause such knowledge or suspicion to be reported to any police official.
This duty to report pertains to to financial institutions, "the executive manager of any bank or other financial institution" is clearly listed in the act, among others. But, it is not limited to this category; directors-general of national or provincial departments, municipal managers, and any public officer in the senior management service of a public body.
I can only assume that this also includes Cabinet members, which makes the expected report-back to Cabinet next week by the ministers delegated to approach the banks even more interesting.
I am neither a lawyer nor a banker (perhaps that’s a good thing), but I would hazard a guess that the banks were stuck between a rock and a hard place.
Over time, they became increasingly uncomfortable with the sort of transactions they saw in the Guptas’ account, and that as the extent of the Guptas’ involvement in a questionable relationship with Zuma and his family members became apparent, it was no longer possible to turn a blind eye to what was going on.
At the same time, if there is one thing the banks will do their utmost to avoid, it is antagonising the government. Given the depth to which Zumas’ — and by extension the Guptas’ — tendrils had infiltrated the government and their moves to control the Treasury, the banks couldn’t afford to make an enemy of Zuma by reporting the suspicious activity to the Financial Intelligence Centre and closing the bank accounts.
It is absolutely true that SA has some of the most stringent banking regulations in the world, but they are only as good as those who enforce them. You don’t need to be a genius to join the dots between Barclays Africa’s decision in December to cut ties with the Guptas and the reappointment of Gordhan as finance minister.
With Gordhan back in the driving seat, and the tide turning against Zuma and the Guptas, the banks had their chance to report the suspicious transactions and close the accounts.
The question now is what will happen with information that the banks might have passed on to the Financial Intelligence Centre, the Hawks, or the National Prosecuting Authority.
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