Reputational risk is a red herring and violates my rights- Dr Survé

Banks have billions of rand to mow you down in court when it comes to the legal system as a mechanism of recourse should your bank account be closed on the vague metrics of reputational risk.

Banks have billions of rand to mow you down in court when it comes to the legal system as a mechanism of recourse should your bank account be closed on the vague metrics of reputational risk.

Published Apr 30, 2024


Dr Iqbal Survé, the chairperson of Independent Media and Sekunjalo, says in his experience of staving off bank account closures for the Sekunjalo group on the basis of reputational risk, the banks don’t care if allegations are true or not.

This as there is currently no just nor equitable appeal mechanism in South Africa available as regards bank account closures on the basis of reputational risk.

Even if there is no evidence of any wrongdoing, collusion or corruption, your bank account can be closed due to case law and the contract aspect between bank and client.

Talking about reputational risk in an interview yesterday, Survé said, “The banks have not defined reputational risk. When they presented it in court papers they referred to media articles in the Mpati Commission. The banks say it doesn’t matter to them if the allegations in the Mpati Commission are true or not (as regards the Public Investment Corporation) - so that is their defence. The banks say all that matters is that these allegations are enough. Remember there were no findings in the Mpati Commission... It appears to be a red herring.”

He said reputation management in terms of the Financial Action Task Force has nothing to do with bank clients. It related to the banks themselves if the banks had done something wrong.

Survé said in terms of the Mpati Commission,“We appointed Judge Heath on the advice of Nedbank to independently investigate the report. We have taken the Mpati report on review in Cape High Court. They have accepted the report. The only entity that needs to look at the review is the Presidency and we have been waiting for three years for them to accept or oppose it.”

“This reputational risk is a red herring and has no basis to what banks are doing. It is unconstitutional and it goes against my rights and all the rights of companies in the country. The banks didn’t expect such enormous opposition to what they are doing,” he said.

I interviewed Survé after it occurred to me that the main issue of reputational risk that led to Nedbank wanting to close down the Sekunjalo group of accounts was allegations of corruption as regards the Public Investment Corporation (PIC).

Subsequent to that perception in public the PIC settled with a Sekunjalo subsidiary, AYO Technologies, and Sekunjalo also did an independent investigation into the Mpati Commission by retired Judge Heath, which cleared the Sekunjalo group and related entities of wrongdoing.

This, as Nedbank itself did an independent investigation into its own corruption allegations before the Zondo Commission, with similar findings.

So I decided to reach out yesterday to ask Nedbank why they had not rescinded the notice to terminate the Sekunjalo group’s bank account given that the evidence in the public domain is favourable to Sekunjalo not being corrupt.

Nedbank said: “Decisions to terminate banking relationships with clients are neither arbitrary nor discriminatory and are taken extremely seriously, as clients are the essence of our business. Such decisions are taken only after a rigorous assessment and an internal independent governance process with reference to all the relevant information and facts have been followed, including a comprehensive due-diligence process overseen by the board.

“Furthermore, termination of a banking relationship with a client is governed by laws which provide that Nedbank’s current processes, as well as our product terms and conditions make provision for reasonable notice to be given to a client prior to termination of products. This process affords customers the opportunity to make representations to the bank, which are always duly considered except in the instance of fraud and a court order,” it said.

On Monday, in an Editor’s Note I called on Parliament to look into the metrics or methodology of reputational risk as it seems to adhere to no legislated standard and is applied to banking clients unevenly, raising questions of subjectivity and discrimination.

What is worse is that there are clear double-standards being applied in South Africa’s financial services sector pertaining to banks and their banking licences in the realm of “reputational risk” versus South African citizens, when it comes to operating under the ambit of reputational risk.

Nedbank in its annual report 2023 clearly stated that it has three strikes of corruption against it, including state capture in the form of the Zondo Commission. FNB and Standard Bank also were fingered for state capture, while Sasfin is under the spotlight for money laundering.

But “reputational risk“ doesn’t apply to the banks because, ”Why?” Why aren’t their licenses suspended if you apply the same standards?

In a nutshell, when it comes to reputational risk South Africans as consumers have one set of rules applied to them, and financial firms another. This is unfair.

No recourse

What is worse is that the only recourse currently seems to be legislative and that is also unfair and discriminatory as a mechanism.

It is no coincidence that banks are being called banking oligarchies, monopolies, cabals, and a boys club, among other unflattering names due to the market concentration of the top five banks handling most of the asset wealth in the country.

So despite customers having more choice when it comes to new entrants to the markets – which is a welcome move – when it comes to business, business clients don’t have much choice as to whom to turn to.

So with a concentration of a handful of banks wielding millions of rands is it fair that they get to spend millions or rand on lawyers’ fees to defend their position on bank closures in the legislative arena, while the average person does not have the same resources, making this as a mechanism of complaint inequitable.

As an example, Dr Survé has spent more than R400 million on court cases trying to get a fair hearing into the attempted closure of the Sekunjalo group of companies’ bank accounts.

But the banks that are pitted against him are dead set on the main court cases not being heard in the Equality Court or the Constitutional Court. As a South African, you have heard all the noise of court case after court case in the attempt for Dr Survé to allow his companies a fair and just hearing in the court of law.

If you push aside the noise of court squirmishes, you need to ask, “What are the banks afraid of?” and “Why are they trying to stop this?”

And at the base of it all is that thing we know as legal precedent.

It is in the banks’ favour currently to act as god in judgement because they can. End of story. To actually have to verify facts is costly and would affect their bottom line – another risk gauge.

This, as the FSCA commissioner Unathi Kamlana in a speech to the Banking Association of South Africa’s Banking Conference on Ethics recently said, “As the FSCA, our primary interest on this issue lies in ensuring that the process of bank account closures is fair and transparent.

“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 the affected parties to challenge decisions they believe are unfounded or have been applied unfairly,” the FSCA said.

Furthermore, in law, a reasonable person is a hypothetical person whose character and care conduct, under any common set of facts, is decided through reasoning of good practice or policy. The standard also holds that each person owes a duty to behave as a reasonable person would under the same or similar circumstances.

At the end of the day reputational risk doesn’t seem reasonable to a reasonable person and is indeed fishy.

Philippa Larkin is executive editor of Business Report