Banks tell inquiry of their resistance to Zwane’s bullying tactics

Former ANC secretary-general Gwede Mantashe cornered ABSA CEO, Maria Ramos, at a gathering of Business Leadership South Africa for a meeting with senior party officials where they allegedly tried to unlawfully raise the Guptas’ banking woes.

But, like Standard Bank’s CEO Sim Tshabalala, Ramos agreed to visit Luthuli House along with senior colleagues, having secured strict conditions for the meeting and a guarantee that no confidential client, i.e. the Guptas, would be raised.

Yasmin Masithela, ABSA’s current CEO of Strategic Services, testifying at the State Capture inquiry on Tuesday, said Ramos, at the start of the meeting, emphasised that ABSA was prohibited from discussing confidential matters relating to any past, future or current clients and would therefore not discuss “specific clients”.

The ANC delegation, which included Mantashe, Jessie Duarte and Enoch Godongwana, said they did not want to discuss clients, but rather an unrelated Constitutional Court ruling relating to closures of accounts and the impact thereof on “companies and business”. She said the ANC delegation then raised the issue of collusion among banks to close the Gupta-linked accounts.

First Rand’s now retired CEO, Johan Burger, earlier told the State Capture inquiry that his bank refused to meet the Zwane committee, and while they were invited to a meeting by the ANC’s Enoch Godongwana, that meeting was later cancelled without reason.

Nedbank, the last of the four major banks that had closed Gupta accounts, is scheduled to testify on Wednesday.

Absa's Masithela, describing who banks could act with, said:

“We can act with appropriate authorities, those enabled by our financial regulations (like SARS, the Financial Intelligence Centre or the Reserve Bank) and who can make requests to us on matters relating to client relationships.

“This committee was not an appropriate forum and we did not understand why it was interested in a client issue.”

ABSA slapped several Gupta companies with closure notices days after former president Jacob Zuma fired Nhlanhla Nene as the country’s finance minister in December 2015, a move that sent the markets and the country into shock.

It had taken the bank just over a year, since first making the decision to walk away from what had become dwindling Gupta accounts, to serve notice on, among others, Oakbay Investments, Tegeta Resources, Sahara Holdings, Sahara Distribution, Sahara Consumables, Infinity Media Networks, and TNA Media.

Masithela said the initial decision was made by a committee that sits annually to review politically exposed accounts and Oakbay was flagged in November 2014 by several factors, including adverse media reports and “large unexplained transfers”.

During this review it was established that the Oakbay companies had not used ABSA as a primary or dual bank and were apparently moving their banking business to alternative financial institutions, Masithela said.

As a result, the bank was limited in its ability to appropriately monitor and understand their risk profiles effectively.

However, once ABSA acted, the other major banks followed, triggering an unprecedented level of political manoeuvring that resulted in “invitations” for the CEOs from the country’s largest banks to meet with ANC officials while a Cabinet subcommittee headed by Zwane attempted to pull executive rank over the banks.

Standard Bank testified on Monday how they were accused of having colluded with other banks and whether they were acting on the instruction of White Monopoly Capital.

But interference in a bank’s ability to execute its duties or messing with its risk management protocols would have been detrimental not only to ABSA, but to the country’s banking system as well, Masithela told the commission on Tuesday.

Changing their minds over the Gupta closures would have caused significant consequences as it would have been a clear deviation from legal process.

“ABSA will then have allowed for a deviation from risk processes that would have fallen outside of our system. It would have exposed us to sanction.”

This, Masithela said, could have drawn the attention of the international Financial Action Task Force which was at the time evaluating the soundness of South Africa’s financial controls to combat terrorism and money laundering.

And, as a subsidiary of Barclays plc at the time, there was an additional risk that the bank would have been reported to authorities in the US and the UK which would have impacted on its ability to operate internationally, a huge risk for its South African customers.

South Africa’s highly regulated banks are supervised by the Reserve Bank and operate under international and local laws including the Banks Act, the Financial Intelligence Centre Act and the Prevention and Combating of Organised Crime Act.

These along with ABSA’s own internal policies govern how the bank implements risk management practices to ensure that it is not used for unlawful activity and does not facilitate illegal activity.

Noncompliance can lead to fines, criminal sanction, or personal criminal liability for bank staff, Masithela told the commission.

The Banks Act requires financial institutions to have in place comprehensive risk management processes and procedures to prevent the bank from being used for money laundering or other unlawful activity and failure to comply could lead to the revocation of the Bank’s licence.

Once the big banks cut off the Guptas, they were stuck with the Bank of Baroda, one of India’s largest banks, which operated a tiny office in South Africa until they packed up and left earlier in 2018.

Baroda, hugely exposed courtesy of the Guptas, waited until 2017 when “a higher authority” in India gave instructions to close their accounts, rendering the Guptas, in their own words, “financially impotent”.

First Rand’s Burger testified earlier that his bank did not meet the ANC after a meeting request was inexplicably cancelled.

Burger also explained how he repeatedly pushed back against efforts for a meeting with Zwane’s inter-ministerial committee, citing concerns about the purpose thereof and the parties scheduled to attend.

“I received a phone call from Enoch Godongwana to attend a meeting with the SG (then Mantashe) at Luthuli House.”

Burger said he had initially been told the meeting related to the closure of the Gupta accounts and that the ANC was setting up meetings with the CEOs of various banks to discuss the issue.

However, after a few SMS exchanges, this meeting was suddenly cancelled. The bank, like ABSA and Standard Bank, would later be invited to meet with Zwane’s inter-ministerial committee.

In all his 32 years in banking, this was the first time ever that he had received a request for discussion on banker/client relationship, said Burger. DM