Justin Arenstein
Souths Africa’s Reserve Bank has suspended 130 local branches of inter- national money transfer company, Western Union, following a series of undercover sting operations.
Undercover police allegedly convinced Western Union operators to breach South African foreign exchange regulations while transferring funds to foreign destinations in at least six instances.
Investigators allege the exchange control violations indicate weaknesses that could be exploited by criminals. Reserve Bank senior investigations manager Alexander Ellis confirmed the suspension but refused to comment further.
The clampdown has crippled international money transfers estimated at R100-million a month in at least four South African provinces, and all rural areas.
Only 16 metropolitan Western Union branches in major centres such as Johannesburg, Pretoria, Durban and Cape Town are still operational.
Paris-based Western Union is the largest money transfer service in Africa, and one of the largest in the world with 105 000 branches in 188 countries. The organisation caters largely to migrant labourers and travellers in South Africa, who rely on Western Union to wire money home to families in East and Central Africa.
Western Union Southern Africa director Mathais Luft said the Reserve Bank appeared concerned at the capacity of smaller rural branches to implement the country’s “very” stringent exchange controls.
“They have expressed concern about our local reporting capacity. We stress that all our operations are above board. Western Union is also currently engaged in very positive discussions with an institution with a wide rural network and the necessary controls,” said Luft.
He refused to elaborate, citing confidentiality agreements with the unnamed institution.
Western Union’s South African implementing agent, Union Africa Money Transfer (UAMT), appears uninformed about the discussions.
UAMT managing director Winston Wiggill said he had been instructed not to speak to the media, but stressed that his organisation had in the past always cooperated with South African law enforcement agencies.
“We have only ever lost R189 000 [due to irregularities] in six years of operation. That’s a tiny amount considering the volumes of money we deal with, and far better than many commercial banks,” said Wiggill.
UAMT has meanwhile contested the Reserve Bank’s search-and-seizure raids on its head office and various agents last week.
A 50-page submission to the court by UAMT suggests the Reserve Bank action may be aiding at least two commercial banks in attempts to squeeze UAMT out as Western Union’s local representative. The papers note that the Reserve Bank’s first clampdown on UAMT in 1999 coincided with First National Bank’s bid to become Western Union’s South African partner.
UAMT and Western Union managed to resolve the dispute with regulators out of court, but the affidavit notes that the new Reserve Bank clampdown again coincides with a Standard Bank bid for the lucrative contract.
Reserve Bank deputy general manager for exchange control, Charles van Staden, refused to comment on the issue unless the bank was granted full access to the Mail & Guardian’s article prior to publication. He dismissed concerns that his demand amounted to pre-publication censorship. African Eye News Service