Tag Archive | banking

FICA Bill : Hearings on legal point

President Zuma vs Parliament on FICA Bill

…..editorial……The convoluted thinking that is taking place in South Africa to avoid the consequences of the law has once again become evident in the ongoing battle between the Presidency and the Standing Committee on Finance with the return  of the Financial Intelligence Centre Amendment (FICA) Bill  by the President to Parliament and therefore unsigned into law.

Worried by warrants

The President claims that for representatives of the Financial Intelligence Centre (FIC) to visit business premises and even homes under special circumstances without a search warrant and in cases where obtaining a warrant would defeat the purpose of the search, may be unconstitutional.   FIC, meanwhile, has confirmed in Parliament that between the years 2011 and 2016, 930 warrantless searches with the consent of those searched had been carried out by its inspectors.

Rare happening


The move
by the President, after five months of inaction, has now forced Parliament to seek the opinion of senior counsel to reinforce their views that warrantless searches are indeed acceptable in terms of the Constitution.   The FICA Bill was originally recommended for signature into law and sent to the President by no lesser body than the National Assembly, then concurred to by the National Council of Provinces, both on the advice of Parliament’s own legal counsel on constitutional issues.   This is normal procedure with every piece of legislation.


This reason for further delay on the President’s part must have raised a few eyebrows at the Organisation for Economic Co-operation and Development (OECD) centre in Paris.     As those in financial circles are aware, the Bill was tabled by the Minister of Finance with the objective of not only aligning South Africa’s banking and financial institutions with global financial advances but to counter growing and localised corruption and money laundering.

Hurry up and wait

This august body, the OECD, much maligned by the Minister of Mineral Resources in tandem with his opinions on the SA banking system, is currently awaiting South Africa’s confirmation that it will comply with the latest round of requests for compliance with the fourteen rules, now amended, to counter international financial terrorism and extend the OECD’s ability to combat international money crime.

Warrantless searches are allowed in most major countries where compliance with OECD conditions are sought but in the same countries, as has been worded in the FIC Bill, the circumstances to allow this only in cases of suspected money laundering are specifically worded and this includes cases where the application for a warrant or a delay in obtaining a warrant would remove the element of surprise.

Treasury wanted immediacy

The request for South Africa to conform is more specific in terms of the requirements of the Financial Intelligence Task Force (FATF), better known by banks as the criminal investigation department of OECD.    A date for compliance was set by them in February 2017 and agreed to by South Africa. The banking sector is ready to implement the new rules both in staffing terms and with systems and procedures waiting. Minister Pravin Gordhan and some senior ANC party members have been vocal with their suspicions for the delay.

Mystery motives

In what appears to be almost Machiavellian in political terms, the President, with the knowledge that he must have that Parliament was about to close for business, might, according to some MPs, have lodged his further objections to the Bill in the hope that further support for his views could be garnered from subsequent hearings, submissions and more debate.

Chair of the Standing Committee on Finance, Yunus Carrim, countered the President’s unexpected move by cancelling urgent meetings on the Insurance Bill, scheduled for debate and hearings on the last two days of parliamentary business, and called for an urgent meeting of his Committee.  

Advocate Frank Jenkins, Parliament’s legal adviser, was asked to attend and give opinion, together with manager of FIC, Pieter Smit.   Also attending was the Deputy Minister of Finance, Mcebisi Jonas and National Treasury deputy DG responsible for FIC matters, Ismail Momoniat.

Carrim firm on subject

Adv. Jenkins confirmed the sections of the Constitution provided for a Bill to be returned but only once and on specific issues.  He saw the President’s action as unusual in that a Bill, worked on for two years with every clause scrutinized and with input from constitutional experts, could be returned at such a late stage with so much time having elapsed during which an objection could have been easily submitted.

He then explained to MPs how the Constitution does indeed allow for warrantless searches in terms of the Constitution’s specific wording on the subject matter. He listed six precedents of Bills passed into law recently where warrantless searches are allowed in certain prescribed circumstances in terms of the Constitution.   He said this was not a complicated issue at law in view of precedent.

No good choices

Chair Carrim said he had no choice but to treat the FATF issue as the least worst of bad scenarios and he was forced to apply parliamentary rules to the issue in order that the President’s move could be countered with indisputable legal fact and by applying parliamentary rules objectively and strictly. He wanted to observe protocol so that the matter could become “de-politicised”.  

He said the media had called him “brave” to stand in the way of the President’s obvious wish.   This was not the case, he said, but just a matter of following the rules and respecting the fact that Parliament was the final arbiter in such matters since Parliament represented each and every citizen of South Africa.

The response

The rule, Adv. Jenkins explained to the Committee, was that should a Bill be returned to Parliament by the President, having been beforehand approved by the House on every issue in the Bill, then only the specific point, i.e. warrantless searches, could be discussed and debated subsequently and altered if seen fit. This was stated in the Constitution.   The Bill could then be returned to the President with Parliament’s view on the subject matter alone.

He said that should the Committee decide that the President’s view was a baseless argument then they could probably avoid the President referring the matter to the Constitutional Court with further long delays by supplying advice from counsel.  Chair Carrim agreed with this suggestion and with Committee approval across all parties the call for legal submissions in the form of submissions in the New Year and the matter down for hearings and debate in Parliament after it opens in February/March 2017.

Hands off the Bill

Parliament could then return the Bill to the President, Carrim explained, with full legal constitutional opinion and throughout the whole process, only the issue at hand, i.e. warrantless searches, would be allowed for debate.   No other substantive issues could be raised, debated or voted upon as the Bill had been approved by Parliament, Carrim said, and only one issue was under scrutiny.

He said, this would be clearly advertised when calling for submissions and the Speaker asked to observe the rule in any subsequent National Assembly debates.  Any other comments and observations would be regarded as irrelevant.  As far as the OECD was concerned, this was a risk that Treasury would have to handle in their meetings with OECD but this route, Yunus Carrim felt, was the better option.

Believe it or not

For the five months that President Jacob Zuma has been refusing to sign the Bill into law
and refusing to give any reason other than finding the time to “apply his mind to the issue”, any amount of publicity on the need for speed must have landed up on the President’s desk
, even if  just legal advice on the subject instructed by the President.   Lying to Parliament has now become a presidential practice, cartoonists Jonathan Shapiro, Neale Blandan and Jeremy Nell having turned President Zuma’s relationship with Parliament into an art form. 

The “G” factor

As far back as 2009, the OECD published a list of countries divided into three parts, all depending on how or whether they complied to “internationally agreed tax standards”, in select jurisdictions, tax havens or other financial centres of interest and whether they had implemented appropriate legislation in line with OECD requests.   

The procedures are now part of standard international banking procedure but now relate specially to identifying money movements of “prominent persons” and where money laundering seems possibly to be evident.

Whether the President, as the most elevated and “prominent person” in the country, might be trying to protect himself or other “prominent persons” including friends and associates alike against investigation into money movements is not, however, the main issue.

All suffer

The far more serious issue is that the President’s seeming neglect in responding for months has exposed the country’s banking and financial systems to risk.  This is quite outrageous.  The President may or may not have a good argument that it is constitutionally inviolate for the FIC to search without a warrant and possibly with or without warning beforehand  but it seems a stretch of the imagination, given his track record, that he is morally indignant.

Parliament has now issued a gazette calling for comment with the following proviso: “All submissions must therefore only deal with the constitutionality of section 45B (1C) dealing with warrantless searches in clause 32 of the Bill.     As the hearings are on the constitutionality of warrantless searches, those making submissions are requested to provide legal opinions for their arguments if possible.  No consideration can be given to submissions dealing with any other provisions of the Bill.”

Hearings are promised as well in mid-March 2017 for  generalised input on the legislation, part of Chair Yunus Carrim’s call for Parliament to investigate “transformation in the financial sector.” 

 

FIC Bill hold up goes to roots of corruption – ParlyReportSA

Red tape worries with FIC Bill – ParlyReportSA

Madonsela: state capture and corruption linked – ParlyReportSA

 

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Financial Sector Regulation Bill heralds twin peaks

Twin Peaks underway for financial sector with new Bill……

The Draft Financial Sector Regulation Bill, proposed by national treasury and approved by cabinet in December 2013, has had its public comment period extended to 7 March. This is probably the most important financial legislation to be drafted since the global financial crisis of 2008.

The Bill mandates the South African Reserve Bank (SARB) to promote and maintain financial stability within an agreed policy framework and form a Financial Stability Oversight Committee to assist the SARB to “maintain, protect and enhance financial stability.”

More regulation

The Bill marks the generalised movement towards the recently declared “twin peaks system” of regulating the financial sector which, Treasury says, is founded on the principle of protecting customers more effectively and ensuring that financial institutions are financially sound.

The “twin peaks” system provides for two dedicated regulators: a Prudential Authority to ensure the soundness of financial institutions, and a Market Conduct Authority, to protect customers and ensure financial institutions treat them fairly.

Treasury says that its two recent policy papers responding to lessons learnt in the 2008 global financial crisis – “A Safer Financial Sector to Serve South Africa Better “ released back in and the more recent paper. “A Roadmap for Implementing Twin Peaks Reforms” released in February 2013 – are available on the treasury website.

Financial Stability Oversight Committee

The draft Financial Sector Regulation Bill covers the first phase, which is to establish the two regulatory authorities. The Financial Stability Oversight Committee (FSOC) is to be chaired by the Governor of the Reserve Bank, with appropriate financial stability powers.

Importantly, the Bill provides a legal framework to enhance coordination and cooperation between both regulators and a memorandum of understanding between the two. In particular, the FSOC will ensure a coordinated and immediate response to risks to the stability of the financial system.

In addition, a Council of Financial Regulators (CFR) will coordinate all regulators, standard-setters and other agencies with a mandate over financial institutions on issues like financial stability, market conduct, competition, legislation, and enforcement, even those not reporting to the department of finance.

Global financial threats

Treasury says in its introduction to the draft Bill that the global financial crisis illustrated the importance of having mechanisms in place to deal with disruptions in the financial system that threaten financial stability. Now, where taxpayers’ money is at risk, the Bill provides for crisis management decisions to be taken by the Minister of Finance.

The Bill also establishes a shared enforcement mechanism, the Financial Services Tribunal, which is aimed at encouraging compliance with all aspects of the new regulatory regime. The Bill enhances existing regulatory and enforcement action powers (such as suspension or withdrawal of licences and approvals; orders to take or cease particular actions; and debarments) of the regulators, Also, it says, it “provides for a robust appeal mechanism”.

The Bill also, by changing the Financial Services Ombuds Schemes Act, seeks to strengthen the ombuds system by putting measures in place to enhance public awareness of the ombud system, requiring all financial institutions to be members of an ombud scheme as part of public protection.

Workshops on the “twin peaks” system have been held by National Treasury for all financial institutions and government financial agencies

Earlier articles on this subject:

http://parlyreportsa.co.za//cabinetpresidential/treasury-calls-for-twin-peak-system-with-two-financial-bills-2/
http://parlyreportsa.co.za//uncategorized/parliament-debates-three-financial-market-and-tax-bills/
http://parlyreportsa.co.za//cabinetpresidential/banks-amendment-bill-sets-up-faster-interventions/

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