Sekunjalo’s fight against the South African banks and banking system highlights a significant gap in the regulations and promotes the need for a serious overhaul of the Financial Services Act.
The conversation around banks and banking has heated up of late. And as always when reading the media, there are opposing views as to what is happening. But a certainty is that if you are a company or an individual with a turnover or savings of more than R10 million, you are on your own if something goes wrong, as the Sekunjalo Group and its more than 200 subsidiaries are finding out – the hard way.
Let us explain.
South Africa operates a Twin Peaks model of financial oversight, which is a comprehensive and complete system for regulating the financial sector, prioritizing customers, and protecting their funds. Its aims are two-fold; to strengthen financial stability and the soundness of financial institutions, and to protect customers from any transgressions by this sector, all of which are overseen by a dedicated Prudential Authority (PA), which operates within the administrative ambit of the Reserve Bank (SARB).
The second aspect of the Twin Peaks model looks to ensure that customers of these financial institutions are treated fairly, and this is overseen by the Financial Services Conduct Authority (FSCA).
To this end, the Financial Sector Regulation Act 2017 was signed into law on 21 August 2017.
The Act also encompasses such areas as financial inclusion, transformation of the sector, promoting confidence in the sector and, the prevention of financial crime that can undermine the integrity not only of the sector but the country itself.
This would lead one to presume that the PA and the FSCA have been set up to regulate and have oversight over South Africa’s banks and keep them in line – with not only the country’s own rules, but also by international principles, guidelines, and laws.
Importantly, the Act suggests that both also do so to protect the customer – whether an individual or a company or a Group of companies – from the banks and their actions.
So, who is protecting the Sekunjalo Group of companies (some 200 + subsidiaries including Independent Media), from having their bank accounts summarily closed, which is what South Africa’s major banks have been trying to do, or have already done, over the past two Years.
This set of untenable circumstances will effectively see many thousands of people unemployed and the companies they currently work for, disappear. This will leave not only a gap in the pockets of the innocent employees caught in the banks’ crosshairs but also a large hole in the country’s tax collection. Billions of Rands will be wiped out overnight.
The Sekunjalo Group has launched a series of legal cases to counter the banks' offensive.
Given they are the de facto ultimate authorities of the financial sector, both the PA and the FSCA has been joined to Sekunjalo’s Equality Court papers. However, a quick reading of the papers and the Deputy Governor of the SARB and former CEO of the PA, Kuben Naidoo’s affidavit, suggests that neither of these bodies has any skin in the game here.
Naidoo, also says in response to Sekunjalo asking the PA for assistance that: “I have no power in law to intervene on behalf of a customer, company or private individual, in their relationship with their bank or any other financial services provider.”
This is odd, as the PA and FSCA’s stated aims are to assist customers and ensure they are treated fairly. Is closing the bank accounts of some 200 companies – when they are no formal charges against any of them – fair and reasonable?
When Business Report asked the FSCA for comment regarding this matter, the response included the following from their spokesperson: “Where a person is aggrieved by a bank closing its account despite following the processes as set out in the Conduct Standard for Banks, a person may complain to the Ombudsman for Banking Services. Please visit the website for the Ombudsman for Banking Services regarding the complaint process.”
But herein lies the conundrum as the Ombudsman for Banking Services (OBS) has a similar confusing stance, and has also refused to comment on the Sekunjalo matter.
On the OBS website, it states that it can only handle complaints that:
- Relate to products or services provided by a bank.
- Involves a claim of an R2million or less.
- The complaint arose in the past three years.
- If the complainant is a company the annual business turnover must be less than R10,000,000.
The question is then if a customer or customers (including companies such as Sekunjalo) have a turnover of more than R10 million where do they go to complain if they are being unfairly treated?
The only option left to these organizations is to launch costly lawsuits and for a court of law to decide, which is what Sekunjako has done as a last resort, given the banks have not furnished any tangible or credible reason for the closure of accounts, despite the company says, it's repeated requests.
Neither the FSCA, Financial Intelligence Centre (FIC) nor the PA have included any mention or hard evidence of any suspicious dealings by any of the companies and individuals involved in the Sekunjalo matter in their legal papers. But this has not stopped some sections of the media, particularly the Independent Media’s detractors and the banks themselves, from sowing and seeding doubt into the minds of readers, creating a smokescreen from behind which the country’s banks can continue with business as usual.
Yet, the banks themselves have been the subject of controversy and proven evidence on many an occasion, with the PA and the FSCA fining many of SA’s big banks, including for the banks’ participation in money laundering.
It is time, for an overhaul of the Financial Services Act and Regulations and for the PA under the auspices of the SARB, a private body legislated by the government, to put their money where their mouth is and protect customers. If this means going to court, then so be it.