Amid Sekunjalo Group’s high-profile efforts to force banks to provide it with accounts, I want to pose an awkward conceptual question: should banks be forced to do business with companies they don’t want to? I think there are some narrow circumstances in which the answer is “yes”.
But let me be clear: banks’ shutting of accounts has been crucial to fighting state capture and corruption. I don’t think it is an exaggeration to say the banking sector stopped the Guptas. It was only when banks closed their accounts that the wheels of state capture ground to a halt. Without bank accounts, it is very hard to steal money at any scale.
While this was undoubtedly good for SA, it has always given me some discomfort. Banks are within their rights to shut the accounts of anyone they don’t want to do business with; moreover, they have a legal obligation to avoid business with anyone potentially involved in crime.
Banks that don’t have the systems to monitor client activity or report suspicious transactions are fined by the Reserve Bank. They also have a legal responsibility to protect themselves from reputational risks such as being identified as doing business with criminals. But there is little due process involved in decisions that have an existential effect on businesses as well as people’s ability to enjoy their freedoms.
I say this cautiously because there are some who might be emboldened by those words. It is only when a client fights back that we hear of banks shutting down accounts (though banks routinely shut accounts of others who prefer to keep quiet about it). The loudest fight right now is being waged by Iqbal Survé’s Sekunjalo, which is in a court and waging a propaganda war against banks that are trying to cut it off. Independent Media newspapers, a cog in the bigger machine, have become a paroxysm of outrage about banks in general and account closures in particular. I shudder at the thought of adding grist to its mill.
The banks’ reasons in that case are obvious: Sekunjalo and Survé have been fingered in many media reports for questionable, if not corrupt, dealings. Moreover, as made clear in recent court papers filed by Nedbank against an attempt by Sekunjalo to interdict the bank from closing its accounts, banks have a line of sight to individual transactions. Investigative journalist outfit amaBhungane has reported that among these is Survé paying R25m to his former wife as part of a divorce settlement out of a company account.
The group companies still have billions in cash, thanks largely to investments by the Public Investment Corporation that were heavily criticised for all kinds of irregularities by the Mpati commission of inquiry. The Nedbank legal papers show how this money seems to flow between companies without any underlying commercial rationale.
But these specific examples obscure an underlying concern. Having a bank account has become essential to most of our lives. Without one, many fundamental rights become impossible — you cannot exercise freedom of expression or freedom of movement without the means to buy communications or travel services. (Of course you may also not be able to exercise these because you don’t have the resources to do so, and that is why the eradication of poverty is also important.) You would also struggle to hold a formal sector job expecting to be paid in cash.
There are many aspects of public policy that encourage the trend to cashless societies, so public policy also needs to be concerned with the negative aspects of it. Such concerns led the EU to legislate for a right to a basic bank account in member countries. In Canada, banks must open an account for an applicant, conditional only on the applicant having appropriate identification. This is not just a developed world phenomenon. In India, the central bank has issued guidelines that banks should open an account for any applicant, though this falls short of a legal requirement.
These regulations are focused on natural persons. But case law in the EU is pushing this into business relationships too. There is a bridge to the rights of natural persons because the right to trade or transact is often seen as fundamental, and a business is a means to substantively enjoy these rights.
A fascinating, long-running case between Dutch bank ING and a sauna business called Yin Yang (which sweated through several appeals and counterappeals) led to the Dutch supreme court late last year ordering ING to reopen an account for Yin Yang. The court found that banks have a special duty of care by virtue of their socioeconomic role that may oblige them in certain circumstances to open accounts for businesses that cannot function without one.
This is an issue that we need to properly consider in SA, not least so that we can prevent the misuse of moral arguments by the likes of Sekunjalo. We must also ensure that we eliminate the potential for unfair actions by banks.
It is rightly a matter for the Financial Sector Conduct Authority to develop, though it would have to work closely with the Financial Intelligence Centre and Prudential Authority to find the appropriate balance between maintaining the integrity of the financial system and ensuring it treats customers (and non-customers) fairly.