By Feroza Petersen

IN August of 2022, the SA Reserve Bank (SARB) imposed sanctions, including a R20 million fine, on Nedbank in accordance with Section 45 of the Financial Intelligence Centre Act (Fica).

The sanctions come in the wake of a compliance inspection conducted from May to June 2019, and less than two months after the implementation deadline for fundamental amendments to Fica, which was set for April 2019.

In my opinion, Nedbank's ties to Regiments Capital and the controversial Gupta family, underscores the intricate web of corruption and complicity that is gripping the nation.

Nedbank’s non-compliance has substantial implications for the financial landscape in South Africa. Foremost, are the concerns about the effectiveness of regulatory oversight and adherence to financial compliance standards within the nation's banking sector.

Financial institution compliance, responsibility and accountability needs our undivided attention and a closer look at the broader picture when the custodians of our money go rogue.

Although the decision by SARB’s Prudential Authority (PA) to impose sanctions underscores the gravity of the bank's transgressions and sends a clear message regarding the necessity of compliance with Fica to the market, I do not believe enough has been done to prevent similar from happening again – at Nedbank or at any other bank.

Non-compliance with financial regulations, particularly those designed to combat money laundering and protect the integrity of the financial system, tarnishes the reputation of any financial institution.

At the time of Nedbank's failure to adhere to Fica, questions were raised about its commitment to ethical and legal banking practices. These questions continue to linger and the bank must work diligently to restore public trust and demonstrate its dedication to upholding the highest standards of financial integrity.

The same applies to every bank in the country.

Scrutinising Nedbank's association with the Gupta family and what subsequently happened, raises important questions about the effects Nedbank’s actions have had on state-owned entities like Transnet and the Airports Company SA (Acsa).

Transnet, in particular, has suffered substantial losses, with a significant portion attributed to Nedbank's involvement. The bank’s role in restructuring Transnet's debt, coupled with the substantial fees it earned for these services, understandably fuelled suspicions, which ultimately led to investigations.

Did Nedbank conduct adequate due diligence on Regiments Capital? Did it report any suspicious activities associated with the company to the requisite governmental and industry bodies? And if not, why not?

Recent reports show that the Special Investigations Unit (SIU) found that Nedbank, which was the first major bank to be temporarily defeated by the Sekunjalo Group in the battle against unfair termination of bank accounts, unlawfully and corruptly participated in a R12 billion Transnet locomotive contract.

Nedbank, on its website, espouses values like integrity, respect, and accountability, and claims to be “people-centred and client-driven”. However, I feel that these and other more recent questionable actions such as bank account closures for no tangible reason, raise questions about the alignment of these values with the bank's practices.

Nedbank's challenges extend beyond regulatory compliance however. In the most recent (July 2022) assessment of money laundering, terrorist financing, and proliferation financing risk in the banking sector, the PA determined that the inherent risk in the country's banking sector was high.

This highlights the importance of maintaining vigilance in ensuring that all financial institutions meet their regulatory obligations.

In response to the sanctions, Nedbank issued an official statement acknowledging administrative and reporting shortcomings and that it had received a financial penalty of R20m – with R15m suspended.

In essence, a slap on the wrist, which I am sure they will make up for by imposing fees on its clients somewhere. It is, however, a significant blight on the banks’ reputation.

On its website, Nedbank states: “While Nedbank has paid the financial penalty and acknowledged the administrative shortcomings present at the time in 2019, it would like to highlight that the lengthy delays in the promulgation of the amended FIC Act had particular adverse implications for Nedbank, given the resultant extended delays in requirements definitions which impacted the timeous finalisation of system requirements having to be contended with in conjunction with Nedbank’s comprehensive information technology transformation programme that was already well underway.

“Since the revised FIC Act implementation and the SARB PA inspection in 2019, Nedbank’s related compliance and risk management environment including its reporting obligations under the FIC Act has matured extensively and ongoing significant investments have been successfully implemented to further enhance the end-to-end control and compliance environments.”

Nedbank is not alone, however, in facing scrutiny for its actions. South Africa's other major banks have also come under the spotlight of late, for summarily closing bank accounts, citing potential damage to their reputations.

While these actions are framed as measures to protect their standing – and in the case of Sekunjalo, companies that have not been found to have done anything wrong – they have ignored the delicate balance between safeguarding against illicit financial activities and preserving individuals' and businesses' access to essential banking services.

As a citizen of this country, I feel that the integrity of South Africa's financial system and its institutions is critical, and we, as a nation, must continue to demand transparency, responsibility, and obedience to the rule of law, and as intended by our Constitution.

Banks and the financial sector, cannot be a law unto themselves, as is the case now.

* Feroza Petersen is a freelance writer