Tim Cohen’s article reflects a high degree of confusion on the role of a market conduct regulator like the Financial Sector Conduct Authority (FSCA) and interprets the speech of Commissioner Unathi Kamlana completely wrong. He also does so because he seems to be making a few assumptions that Kamlana did not even refer to in his speech.

It is precisely because the FSCA acts to “passionately protecting the rights of people who are not politically connected businesspeople” that its Commissioner is rightly raising the issue of protecting such customers from any arbitrary actions from any bank(or any other financial institution) to close their accounts, and simply do so without any due process by simply stating it is “for reputational reasons”. Indeed, Kamlana would not be doing his job if he were to stay silent when any bank closes any account without any notice and proper due process. Kamlana studiously avoided mentioning any specific bank-client case, but was talking generally, so it is not clear why Cohen jumps to any conclusions about Kamlana trying to protect any specific customer or “billionaire”.

Let me confess that like Kamlana, I too made a presentation at the same BASA workshop, and raised the same concern on the closure of banking accounts, even though I had not seen Kamlana’s speech beforehand, when preparing for the workshop. Both Kamlana (whilst he was at SARB) and I (whilst head of tax and financial sector policy at Treasury), were so concerned about the arbitrary closure of accounts that even in 2017, we proposed the section 106 amendment to the Financial Services Regulation Act (FSRA)  even whilst we were both in the frontline defending our institutions against the Gupta- and Zuma-attacks and attempts to capture National Treasury and associated agencies. We did so because we believed that in these modern times, it must be recognized that having a basic banking account is necessary for any person (and business) to earn an income, pay accounts and be able to participate in the economy. 

Cohen conflates the role of the market conduct regulator to protect retail customers  and the very necessary responsibility process of dealing decisively with those involved with crime and corruption. Both objectives are critically important, but require different agencies with different mandates to act – in the case of those criminally abusing the financial system,  the primary role is for the law enforcement agencies. The point is that where a crime has been committed, or where there are suspicious transactions, it is only the law enforcement authorities who can and must act, and do so without fear, favour or prejudice. 

Many of our banks acted bravely (and in my view correctly!) to do so in 2017, when they closed the Gupta accounts, when then compromised law enforcement agencies were refusing to act against corruption – the only question that arises is whether they should have done so earlier. Banks are required to take reasonable steps to become aware of suspicious transactions,  and know their customers, and file suspicious transactions with the FIC. After assessing such suspicious transactions, the FIC is required to provide them to law enforcement and other investigative authorities, for further investigation and action.  Following state capture, government is striving to rebuild the capability of law enforcement agencies to do so. And to deal with all serious and complex money laundering, including the enablers, which will also assist SA to exit the greylist. 

Cohen’s approach for FSCA to prioritise the need to act against the Gupta family and other dubious billionaires (whose wealth has been from looting public funds or resources) will not only compromise FSCA in focusing on its core mandate, to protect financial customers, but will also take the focus away on how best to make those abusing the financial system be held criminally liable for their actions. 

 In South Africa, given the degree of inequality with many households having low or no income, the objective of financial inclusion and financial integrity cannot, and should not, be taken for granted. All Kamlana was emphasising was that there must be some form of due process before any bank account is closed. Indeed, all banks have signed up to a banking code that requires them to provide reasonable prior notice to clients before they close any account. I believe it needs to go even further, for banks to be also committed to a fair and specified process before doing so. But just as important as closure of existing clients, is the need to regulate that banks also do not refuse to take on new (and low profitable) customers during the onboarding process, even before a bank enters into a contractual relationship with a client. 

The issue of how banking accounts are closed is not specific to South Africa, but a globally recognised challenge. The EU took steps almost a decade ago in 2015, to ensure that all residents in any EU country are entitled to at least one basic payment account. Its rights charter prohibits discrimination on “any ground such as sex, race, colour, ethnic or social origin, genetic features, language, religion or belief, political or any other opinion, membership of a national minority, property, birth, disability, age or sexual orientation.” The UK responded recently to the questionable process by a bank to close the account of a leader of a (reprehensible) political party, for “reputational” reasons given his controversial political views (and his hateful and racist statements). Just as all individuals are entitled to basic political and human rights, so too are they entitled to a basic banking account. Indeed, unlike billionaires, low- and middle-class households are unable to take the legal route to challenge a powerful bank which has closed their account. It is for the regulator to ensure that such households are protected from powerful financial institutions. 

Neither banks nor the FSCA can replace the role of law enforcement agencies, but we need to improve the functioning of our anti-money laundering system to ensure that our system works more effectively to deal with those engaging in corruption and abusing our financial system.