- Banks say they always listen to their clients before closing their accounts.
- But they must strike a balance between maintaining client relationships and complying with financial intelligence laws.
- This comes after the Zondo Commission recommended that there be laws protecting clients before banks shut their accounts.
The big banks say they are not hostile to letting their customers present their cases before closing their bank accounts. They have done it in the past and will cooperate if laws need to be changed to ensure that their customers are afforded a fair opportunity to defend themselves when banks want to close their accounts.
This comes after the release of the final instalment of the state capture report on Wednesday, which addressed the closure of the Guptas' bank accounts. The Judicial Inquiry into State Capture recommended that existing legislation be changed or that Parliament introduce new laws requiring banks to afford clients an opportunity to defend themselves.
Between December 2015 and 2016, FNB, Absa, Nedbank and Standard Bank closed the bank accounts of companies owned or controlled by or linked to the Gupta family. Even the SA Reserve Bank supported the banks' decision, saying they could have been locked out of the international payments system if they had kept the Gupta family's bank accounts open.
After the Gupta-linked events, banks have also closed accounts of Sekunjalo companies. Standard Bank is the only one of the Big Four that has not closed accounts of Sekunjalo companies. Nedbank was forced to reopen Sekunjalo Group bank accounts this week following an Equality Court ruling.
In the case of Gupta-linked companies' accounts, commission chair and Chief Justice Raymond Zondo criticised banks unwilling to hear what the Gupta-linked companies had to say.
He felt that given their powerful position, it was "unacceptable" that banks had no obligation to give their clients an ear, especially when they say the reasons behind the closing of accounts are suspicions that the client may be involved in illegal or corrupt transactions.
The Supreme Court of Appeal previously ruled that banks were not obliged to hear the client's side since the two shared a contractual relationship. But Zondo said the fact that the relationship is contractual is neither here nor there because there are other contractual relationships, like employment, where Parliament intervened to ensure fairness.
Nedbank and Standard Bank said their current processes already make provision for reasonable notice to be given to a client before termination of products which allows customers to make representations to the bank.
Nedbank said those representations are always duly considered, except in the instance of fraud and a court order.
In the case of Gupta-linked companies, it provided "cogent" reasons for its decision, and those were confirmed when looting became public knowledge.
"The banks were obliged by law to act against the Guptas. [Even] Zondo pointed out that some banks took too long to close the Gupta accounts," said the bank in a written response.
Standard Bank said it recognises the good work done by the Zondo Commission. And "as a responsible corporate citizen", it has and will continue to participate in any parliamentary processes to amend existing laws or enact new ones that affect it and its clients.
But while it is committed to treating all customers fairly, it must also strike the appropriate balance between maintaining client relationships and ensuring regulatory and legislative compliance.
"This is supported by a set of principles used to monitor regulatory and reputational risks that each client may pose. As Standard Bank, we strive to apply these principles fairly. We will continue to be guided by these principles and will therefore participate meaningfully in any proposed legislative amendment process," it said.
Absa said aligns itself with the position taken by the industry representative body, the Banking Association of South Africa (BASA) in its written submission to the Zondo Commission in 2021.
That submission set out in detail why the banks are obliged to comply with local and international laws or risk regulatory sanctions from the international financial community. On Thursday, BASA said customers already have remedies when their accounts are closed. But it will only be able to comment further on this issue once legislation is proposed.
Investec said its private banking business always aims to develop a deep and longstanding relationship with its clients. So, it will always engage them to understand the position they find themselves in and respond appropriately to their specific circumstances at a point in time.
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