Dr Survé welcomes FSCA’s taking banks to task over bank account closures on basis of reputational risk

Independent Media chairman Dr Iqbal Survé. File photo

Independent Media chairman Dr Iqbal Survé. File photo

Published Apr 25, 2024


Dr Iqbal Survé, the chairperson of Independent Media, yesterday welcomed the move by the Financial Sector Conduct Authority (FSCA) to take banks to task for bank account closures over reputational risk, but said the organisation was failing in its duty to protect South Africans from banks.

The FSCA commissioner Unathi Kamlana in a speech to the Banking Association of South Africa’s Banking on Ethics Conference last week highlighted that the financial sector was taking proactive measures to prevent breaches of Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) due to South Africa being greylisted.

But Kamlana emphasised that closing bank accounts on reputation risk put banks on shaky ground.

He said, “However, some of the actions of the banks which have been particularly contentious in this area of AML/CFT recently pertain to the closure of bank accounts for reputational risk reasons. This is an issue that relates directly to the principles of ethics, fairness, and inclusion.

“Even for AML/CFT compliance purposes, the practice of wide-scale de-risking is considered an undesirable risk management approach.

“The guidelines issued by the Financial Intelligence Centre (FIC) caution against excessive de-risking. They tell us that de-risking poses a threat to financial integrity in general and to the risk-based approach specifically, as it creates opacity in the affected persons’ or entities’ financial conduct and eliminates the possibility to treat Money Laundering/Terrorist Financing risks.”

He said the challenge lay in balancing the legitimate need to prevent illicit activities with the moral obligation to ensure access to financial services.

Kamlana said: “While we understand that banks possess the legal right under contract law to terminate client relationships, questions have been raised as to whether the prevailing common law position is fair to customers, particularly in a context where access to banking is a gateway to broader economic participation?

He also questioned the processes and procedures that banks undertook for bank account closures.

He said, “Banks should not simply cite reputational risk; reasons must be concrete and consistently applied to prevent what might appear as arbitrary account closures. Customers must also have the right to appeal or seek redress to ensure the process remains just and equitable.

“The mechanism for appeal and redress should be straightforward and accessible, enabling affected parties to challenge decisions they believe are unfounded or have been applied unfairly,” Kamlana said.

Dr Survé, in an interview with Business Report, said this was the first time the FSCA has made such a statement and emphasised that the issues the financial body raised were important as the constitutionally enshrined rights of South Africans were under threat by the banks due to bank closures.

This as banks, including Standard Bank and Nedbank, are threatening to close the Sekunjalo group of companies, including Independent Media, to which BR is owned by, on the basis of reputational risk, a process that is non-transparent and unfair.

Dr Survé, the founder and chairperson of Sekunjalo, in a four-and-a-half-year fight and having spent R400 million in legal fees to keep his companies’ bank accounts open, wants his day in the Equality Court, but says the banks are trying to stop that ever happening as they have no evidence.

Sharing his fight for justice, he said: “The banks have enormous power. We would expect the banks would be regulated by authorities. The Banking Ombudsman deals only with a certain level of banking complaints such as consumers and not businesses and is an overworked and under-resourced entity.

“The entity that should be regulating banks is the FSCA. We have written to the FSCA for years (on bank account closures).”

According to the Code of Banking Practice (Code) that regulates various banks’ relationships with their clients a bank can shut a bank account only on the basis if one was corrupt and on the grounds of AML and CFT.

Dr Survé said it was only in South Africa that the Code was being interpreted as that banks could shut accounts on reputational damage and “deliberately distorted” the interpretation of how to shut counts.

“The FSCA is failing in its duty to protect South Africans from the banking cartel and to hold the banks accountable for undermining democracy and South Africans’ rights,“ he said.

Closing bank accounts on reputation risk put banks on shaky ground, according to the FSCA. Photo: Supplied

Dr Survé pointed out the revolving door between banks, boards and the SA Reserve Bank led to a “cosy relationship”, with an effort to sweep the matter under the carpet due to the “revolving door” relationship.

To this end, firstly, he is willing to fight for the right to bank, and jump through numerous legal hoops to get his day to stand in the Equality Court and expose the discrimination that he and his companies have been subject to.

Secondly, Dr Survé clarified that his other litigation actions seek to overturn the legal precedent set out by Bredenkamp v Standard Bank of South Africa, which protects banks’ right to cancel the contract between it and its customer unilaterally.

Sekunjalo and its group companies continue to await the Financial Intelligence Centre’s detailed reasons for the closure of their bank accounts.

* This is the first part of an interview with Dr Survé.