Bill originally approved by Cabinet
.….. sent to clients 20 Aug…..Going to the heart of the issues facing National Treasury on money laundering
and financial crime, or in this specific case the Financial Intelligence Centre Amendment Bill (FIC Bill), is the failure of President Zuma to give assent to the Bill and to sign it into law.
The delay in adding his signature gives yet another signal that there is lack of interface in constitutional terms between the Presidency, the Cabinet, National Treasury and Parliament and all of this adds more uncertainty in the economic sphere.
The main objective of the FIC Bill is to conform with international pressure placed upon South Africa to update its governance ability to monitor international financial crime. During the passage of the Bill, however, it became quite evident to interested parties that the Bill could expose a lot more about South Africa’s own internal money laundering, inflows and outflows, than simply making a contribution to the global money laundering problem.
This, of course, was the original point made by international agencies when calling upon countries to agree to such legislation. Countries have to clean up their own affairs in the process.
Crime busting
The Bill intends enhancing South Africa’s anti-money laundering (AML) processes to combat more effectively the crime of financing of terrorism to be achieved by amending the anchor Financial Intelligence Centre Act “so as to define certain expressions”.
However, in exposing monies destined for terrorism, a lot more than just terrorism could become evident in the category to be classed as “prominent persons”, a fact which has been endlessly debated in Parliament and why the Bill has come to the fore in the media.
More entrants
The fact that some in the Cabinet may not like the preamble to the Bill is evident, particularly expressed by
Minister Zwane in his ridiculous call for a judicial investigation to investigate the motives for calling the banking sector to report to Treasury on individual groupings and persons and for an investigation into the banks themselves for closing the accounts of certain “prominent persons”.
The target of Minister Zwane’s diatribe, the major banks, are a grouping simply preparing for the FIC Bill to become law since they know it was tabled by the Minister of Finance, having been approved by the Cabinet in the first place and having made considerable input to the parliamentary process. Also they must realize that the Bill in turn will make considerable demands upon them in terms of time and money and will be a test of integrity for all.
Split in the ranks
The delay, even if for a moment, is one of many factors giving rise to the belief that the Cabinet is “at war with itself”, a fact which Deputy President Cyril Ramaphosa admits. President Zuma attempted dismally at first to distance himself from Minister Zwane’s attack on the banks, then seemingly relented but suspiciously will not let the banks proceed with the FIC Bill by making it law to set up the paper trails.
Commentators say the President is effectively involved in a web of issues involving alleged “state capture” and perhaps therefore instructions to hold up the Bill maybe upon advice from elsewhere from parties involved in the bigger picture.
No stroke of the pen
However, the very act of signing or not will eventually show if it is the President is alone in this matter since a cabinet statement in 2015 stated that the Cabinet had approved for the Bill for tabling.Parliament awaits, holding its breath, for clarification from the Presidency. President Zuma is now, of course, embroiled on issues over the Public Protector’s report on “stature capture” by the Gupta family and, like so many other important state issues, the FIC Bill has gone on to the back burner.
In the meanwhile others, including actors who would definitely be defined as “prominent persons” as defined by the new Bill, are now crowding the stage and expressing their views, so the FIC Bill must be touching a raw nerve somewhere.
The old argument
Despite the Bill being passed by State Law Advisors, now one Jimmy Manyi, previously a corporate public affairs head, a DG in the Department of Labour and previously a Cabinet spokesperson and recently President of the Progressive Professionals Forum – all in a short period of time – has lodged a constitutional challenge to the Bill, presumably on the basis of invasion of rights regarding pr1vacy.
MPs have complained that the Bill in question has been debated at length over one year at portfolio committee level; hearings were conducted with public expression therefore being accounted for and finally the Bill was passed by a unanimous vote in the National Assembly. Whether nefarious or not, one must assume that any delay by the President is for good financial reason and bearing in mind the call is in fact an international call to upgrade the SA money laundering watch, the stakes are high.
At this stage nothing is stated as fact and rumours abound. An exasperated Minister of Finance Gordon Pravin stated in an interview run by E-NCA, “Well if I can’t get the Bill through then we must just try something else.” He added, “They had just better come and arrest me. What have I done?”, he asked.
The aim
Indeed, the parliamentary record shows quite clearly what Minister Pravin has done. By introducing this Bill and having had it agreed to in the National Assembly, a paper trail is to be established in conjunction with banks on any suspicious movement of money involving “prominent persons”. Locked cupboards will be looked into therefore and it seems as if someone or a section in the Cabinet has had second thoughts about the Bill.
Hopefully, the stall is only temporary and the Public Protector’s report is released
Aims of Bill
Treasury originally said in their briefing to Parliament that the four principal objects of the Bill were to align the country with international standards on AML and to counter terrorist bodies; to enhance customer due diligence within financial institutions; to provide for the implementation of the UN security council resolutions relating to
the freezing of assets of persons suspected of financial crimes; and for the FIC to introduce a risk-based approach by financial entities to the current aspects international financial crime.
Treasury countered any argument that dis-investment would be encouraged by the Bill with the answer that a lack of compliance with international rules by South would be worse but now the silence on the FIC Bill seems to have taken a back seat in National Assembly questioning in the face of rows over state funding, “state capture” and individual financial investigative probes.
Prominent persons
Much debate, took place at the time within the Standing Committee on Finance when the Bill was originally debated over the definition of “prominent persons both domestic and foreign”. These were the persons who were to be monitored as part of the Treasury’s appeal to banks “to know their clients better”. The meetings were chaired by the obdurate, diligent and politically respected Yunus Carrim (SACP) and finally recommended to the House.
Treasury’s Ismail Momoniat was at pains to state to Parliament at the time that “there was no implication or presumption that prominent persons being investigated were presumed to be involved in any financial crime.”
Getting to know you
Probably the provisions most likely to affect entities operating in South Africa are the clauses affecting due diligence. Those that are accountable in terms of the Act will be required to undertake ongoing customer due diligence overviews in order to establish the identity of “the beneficial owner” and a customer’s full identity and whereabouts.
This might be where the problem lies for Cabinet, not necessarily just about the “G people”, as referred to in
Parliament by David Maynier, Shadow Finance Minister (DA), but which might involve issues of party funding – the sources of which at the moment do not have to be declared to Parliament.
Objective views
As put by Roger Southall, Professor of Sociology, University of Johannesburg and quoted in précis form by Creamer Polity, “The ANC is appropriately anti-corruption in its official stance, and indeed has put in place important legislation and mechanisms to control malfeasance. Equally, however, it has proved reluctant to undertake enquiries which could prove embarrassing.” Parastatals still account for around 15% of GDP, Southhall notes.
Whilst Minister Lynne Brown said she was determined to overhaul all state entities, nobody its seems was ready for President Zuma to assume the chair of the new idea of a State Owned Enterprises Council, meaning that he is in charge of para-state strategy – the policy of which was announced many months ago in that government wants a greater slice of the R500m spend on goods and services to go to emergent suppliers.
President Zuma said in Parliament on that issue that the reason for the consolidation was to bring about cross-cutting coordination as a policy within state utilities.
Getting control
Southall continues in his article in similar vein, “The ANC continues to regard the parastatals as ‘sites of transformation’ with certain corporations distributing financial largesse to secure contracts and favour from government. However, their success in so doing is hard to prove given the secrecy of party funding. Secondly, ANC politicians at all levels of government have sought to influence the tender process in their favour.”
On the good side, the Department of Public Service and Administration has, for instance, a draft a Bill underway for Parliament that will require all government departments to put in place measures to prohibit employees and those in special consultancy positions from “directly or indirectly” doing business with government.
Furthermore, the Public Finance Management Act, signed by President Zuma, has proven to be a well-tuned tool to control misdirected state expenditure. The FIC Bill will be the anchor legislation needed to dig deeper into AML money movements.
Who blinks first
With the FIC Bill, the next move then must come from the Presidency, if he remains in office, to give good reason to send the Bill back to the Parliament despite the agreement of the South African banking system to comply with Treasury requirements to report. This is a day-to-day developing issue.
Quite clearly, some banks have forestalled their problems by refusing to handle certain business banking accounts of “prominent persons”, perhaps pre-empting that the Bill would receive Presidential assent and thus earning the ire of Minister Zwane “in his personal capacity”.
Whether the FIC Bill might get further to the very roots of the party funding system is another matter but for the moment the focus was on “prominent persons” and the necessity to get the banks into action in terms of the law.
Meanwhile, the Portfolio Committee on Trade and Industry will continue to debate the “Twin Peaks” legislation which will again tighten up on banking and financial procedures on both regulatory and prudential aspects. But here again, there might be delays.
Previous articles on category subject
Red tape worries with FIC Bill – ParlyReportSA
Parliament, ConCourt and Business – ParlyReportSA
PIC comes under pressure to disclose – ParlyReportSA
and financial crime, or in this specific case the Financial Intelligence Centre Amendment Bill (FIC Bill), is the failure of President Zuma to give assent to the Bill and to sign it into law.
The main objective of the FIC Bill is to conform with international pressure placed upon South Africa to update its governance ability to monitor international financial crime. During the passage of the Bill, however, it became quite evident to interested parties that the Bill could expose a lot more about South Africa’s own internal money laundering, inflows and outflows, than simply making a contribution to the global money laundering problem.
Minister Zwane in his ridiculous call for a judicial investigation to investigate the motives for calling the banking sector to report to Treasury on individual groupings and persons and for an investigation into the banks themselves for closing the accounts of certain “prominent persons”.
The delay, even if for a moment, is one of many factors giving rise to the belief that the Cabinet is “at war with itself”, a fact which Deputy President Cyril Ramaphosa admits. President Zuma attempted dismally at first to distance himself from Minister Zwane’s attack on the banks, then seemingly relented but suspiciously will not let the banks proceed with the FIC Bill by making it law to set up the paper trails.
Indeed, the parliamentary record shows quite clearly what Minister Pravin has done. By introducing this Bill and having had it agreed to in the National Assembly, a paper trail is to be established in conjunction with banks on any suspicious movement of money involving “prominent persons”. Locked cupboards will be looked into therefore and it seems as if someone or a section in the Cabinet has had second thoughts about the Bill. 
the freezing of assets of persons suspected of financial crimes; and for the FIC to introduce a risk-based approach by financial entities to the current aspects international financial crime.
Parliament by David Maynier, Shadow Finance Minister (DA), but which might involve issues of party funding – the sources of which at the moment do not have to be declared to Parliament.
With the FIC Bill, the next move then must come from the Presidency, if he remains in office, to give good reason to send the Bill back to the Parliament despite the agreement of the South African banking system to comply with Treasury requirements to report. This is a day-to-day developing issue.
