Reserve Bank must investigate banks' business relationships with the Guptas

18 April 2016

I have requested the South African Reserve Bank to conduct an investigation into whether certain banks, which had business relationships with the Guptas, complied with all the relevant provisions of the Financial Intelligence Centre Act (No. 38 of 2001), particularly their obligations to conduct enhanced due diligence of Politically Exposed Persons.

We know certain banks terminated their business relationships with Oakbay Investments and its subsidiaries, including Oakbay Resources and Energy, which are controlled by the Guptas. However, these banks appear to have done so when the political weather changed: they only acted after the political fallout caused by the Deputy Minister of Finance, Mcebisi Jonas’s public statement, on 16 March 2016, claiming he had been offered the position of Minister of Finance by the Guptas, weeks before the firing on the Minister of Finance, Nhlanhla Nene, on 09 December 2015.

The sudden decision by certain banks to terminate their business relationships with the Guptas raises a serious question: did these banks comply with the relevant provisions of the Financial Intelligence Centre Act (No. 38 of 2001)before the political fallout and their sudden decision to terminate their business relationships with the Guptas?

The Financial Intelligence Centre’s Guidance Note 3A, which has been in force since 28 March 2013, requires banks to take reasonable steps to establish the source of funds, and to conduct enhanced monitoring of business relationships with (1) Politically Exposed Persons; (2) families of Politically Exposed Persons and (3) closely associated persons of Politically Exposed Persons.

Banks could hardly claim not to have known about the political influence of the Guptas following: 

- the reported appointment of President Jacob Zuma’s son, Duduzane Zuma, to the board of subsidiaries Oakbay Investments; and

- the publication of the official report of the investigation, by the Justice, Crime Prevention and Security Cluster, into the “culture of undue influence”, following the controversial landing of Jet Airways JAI 9900, which has been chartered by the Guptas, at AFB Waterkloof, on 30 April 2013.

The South African Reserve Bank is mandated to supervise and enforce banks compliance with the provisions of theFinancial Intelligence Centre Act (No. 38 of 2001).

I have, therefore, written to the Governor of the South African Reserve Bank, Lesetja Kganyago, requesting him: 

- to order an investigation into whether certain banks, who had business relationships with the Guptas, complied with all the relevant provisions of the Financial Intelligence Centre Act (No. 38 of 2001); and 

- if the investigation determines that certain banks failed to comply, to order any appropriate remedial action or administrative sanctions.

Issued by David Maynier MP, DA Shadow Minister of Finance, 18 April 2016