Eric Khumalo first opened a bank account when he got a job as a field assistant at the Hluhluwe Umfolozi Park in KwaZulu-Natal. He needed the account so that the University of the Witwatersrand, which was employing him in their research programme in the park, could deposit his salary into it every month.
Khumalo goes to the bank once a month, withdraws his entire salary, and returns to the park with his spending money.
He is the type of low-risk client that banks are seeking to exempt from the stringent identification requirements of the Financial Intelligence Centre Act.
He is low risk because his incoming and outgoing money is highly predictable, and never exceeds the few thousand rand a month he earns.
It would be easy to pick up on any irregularities in this account.
However, it would be very difficult for Khumalo to provide proof of residential address. His home is in Kosi Bay, a remote village in the north of the country, and while working in the park he stays in temporary accommodation in the staff camp, with no street address.
Even if the banks succeeded in letting Khumalo know about the new laws, he would not be able to comply with them.
And, more to the point, little purpose would be served in verifying where he lives. Relaxing this requirement would not detract from the efficacy of the law, the banks believe: ”International standards require banks to take reasonable care to identify their clients, they do not stipulate residential address as a requirement,” said banking council spokesperson Claire Gebhardt-Mann.
”We ask that the ID document be sufficient proof for low risk clients.”
The ministerial money laundering advisory council will be meeting on Thursday.
At the meeting the banks hope to hear that the deadline for the verification of the identity of the 17-million or so banking clients has been extended beyond June 30. However they also hope to persuade Finance Minister Trevor Manuel that the current legislation needs to be amended if they are to comply with the requirements of the Act.
Manuel’s advisors apparently assured him that the law is flexible enough to enable banks to accommodate the mass market.
The banks’ legal advisors, however, say the law is ”absolutely prescriptional” and does not allow enough leeway.
RAU academic and money laundering expert Louis de Koker agrees that the law is not flexible enough.
He points out in a paper on the matter that the banks are already using identification methods that do not comply with Fica regulations, and are therefore liable to be prosecuted.
”There are huge fines involved, and it is therefore important to have practical and clear rules,” he said. ”The banks want certainty.”
The banking council has published practice notes recommending that banks either waive the proof of address requirement all together for clients earning less than R5 000 a month, or they accept documents such as a letter from a neighbourhood priest as confirmation of address.
This would make it possible to verify clients such as Khumalo, but the banks are worried that it does not comply with the law as it stands at present.
De Koker believes the best solution to the controversy would be to amend the Fica regulations.
”All we need is clear laws. The minister can do this fairly easily, it would not even have to be discussed in Parliament,” he said. – Sapa