The report in this newspaper on June 24 about banks shutting down accounts linked to alleged gold smuggling operations illuminates a paradox at the heart of modern finance: the institutions we depend on for basic economic participation have become our most powerful weapons against organised crime.

This is no accident. In an interconnected global economy virtually every criminal enterprise, from gold smuggling to state capture, eventually requires access to the formal banking system. Whether it’s laundering proceeds, moving money offshore or converting illicit gains into usable assets, crime and banking have become inextricably linked.

Banks have responded by becoming de facto law enforcement agencies, wielding account closure powers with increasing frequency. The fear, though, is whether this frequency can cross the line into arbitrariness.

This role is important. Our recent progress towards exiting the Financial Action Task Force’s greylist, which should officially happen in October, demonstrates how critical effective anti-money-laundering rules have become. Failure to police our financial system adequately would render SA a pariah state in international finance, with consequences that reverberate through every sector of our economy.

Banks understand this responsibility. The Zondo state capture commission’s findings made clear that their aggressive account closure policies were “highly effective” in disrupting state capture networks. When traditional law enforcement struggled to hold corrupt officials accountable, banks succeeded where courts had failed, cutting off the financial oxygen that sustained these networks.

Yet this success comes with a troubling side effect: the erosion of individual rights through what amounts to financial excommunication.

The true scope of banking’s crime-fighting efforts remains largely hidden from public view. Banks cannot legally disclose individual client details, and most affected customers prefer silence over the additional reputational damage publicity over account closures would bring. We catch only glimpses of this shadow system when clients such as Sekunjalo take their battles to court or when ombudsman complaints surface.

The statistics are sobering. Nedbank disclosed that it closed nearly 200 accounts in 2023. The banking ombudsman received 227 complaints about account closures in 2022 — and that is only from retail and small business clients. The numbers for the industry will be far higher.

Banks justify these closures by invoking the 2010 Supreme Court of Appeal (SCA) decision in the Bredenkamp case, which established their right under contract and common law to terminate banking relationships with sufficient notice. The court ruled that banks, as private entities, could protect themselves from reputational damage by severing ties with problematic clients.

But here’s the crucial caveat: the SCA explicitly noted that it had not considered individual constitutional rights in reaching its decision. This gap in our jurisprudence becomes increasingly problematic as banking access transforms from convenience to necessity.

Try navigating modern life without a bank account. Receiving salaries, paying utilities, accessing government services, conducting online commerce … virtually every aspect of economic participation now requires banking access. When banks in effect exile individuals from the financial system, they compromise fundamental rights to economic participation and human dignity.

Other democracies have grappled with this same tension between crime prevention and individual rights, developing solutions SA could adapt. The EU now mandates that any legal resident must have access to a basic payment account, regardless of their financial situation or past banking history. The UK provides a statutory right to basic banking services.

These aren’t naive concessions to criminal convenience. These basic accounts typically feature restricted functionality — limited transaction types, balance caps and enhanced monitoring. They provide enough access for legitimate economic participation while remaining unsuitable for sophisticated money-laundering operations.

The National Treasury has indicated it is developing responses to the Zondo commission’s concerns about arbitrary account closures. The most promising approach would be mandatory basic banking — requiring all banks to offer stripped down accounts to anyone who requests them, regardless of reputation concerns.

Such accounts could include strict limitations: basic payment functions only, monthly transaction limits, maximum balance restrictions and enhanced scrutiny. These constraints would make them largely useless for criminal enterprises while preserving the fundamental right to banking access.

Banks could retain the right to close these basic accounts upon detecting actual illegal activity — not merely reputational concerns or media speculation. This would maintain banking’s crime-fighting capabilities while establishing clear procedural safeguards.

Corporate accounts present different considerations. Companies, as legal entities, don’t possess constitutional rights in the same way individuals do. Banks should retain broad discretion to terminate relationships with corporate clients based on reputational or business concerns.

However, this corporate exception has limits. When account closures affect the individuals behind companies — shareholders, employees, suppliers — constitutional considerations re-emerge.

The challenge facing SA mirrors broader tensions in democratic societies between security and liberty, collective protection and individual rights. Banks have proven remarkably effective at disrupting criminal networks, but their power to exclude individuals from economic participation demands constitutional scrutiny.

The solution isn’t to hobble banks’ crime-fighting capabilities, but to channel them more precisely. Basic banking requirements would preserve access to essential financial services while maintaining robust defences against money-laundering and corruption. It would also provide banks with a useful shield that would protect them from accusations of doing business with unsavoury individuals — if they were compelled to, it would absolve them of responsibility.

There is an opportunity now to craft regulation that protects our financial system’s integrity and citizens’ constitutional rights. The international precedents exist, the constitutional imperative is clear, and the practical framework is achievable.

The question is whether we have the political will to implement it before the next Bredenkamp case reaches the Constitutional Court — because when it does, the current system’s constitutional deficiencies will be exposed for all to see.

• Stuart Theobald is chair of research-led consultancy Krutham. This article first appeared in Business Day.