/ 8 June 2011

Want to sort out savings? Get rid of FICA

While National Treasury bemoans our low savings rates and looks at ways to encourage savings, it should first look in its own back yard.

In South Africa’s desperate attempt not to look “third world”, our financial authorities have burdened the formal financial sector with onerous money laundering rules which have proven to do little to stop criminal activity as banking scams continue unabated.

Criminals still manage to open fake bank accounts while the Financial Intelligence Centre Act (FICA) only affects law abiding citizens who want to become financially active.

My nieces have become the latest victims of FICA red tape and one has to wonder if FICA is not in fact terrorism’s ultimate success. The administrative and time costs of opening a bank or savings account must be costing the country billions each year and it is very much a disincentive to save.

My niece’s FICA dance is now turning into a comical farce which leaves me to wonder if the institutions themselves are not exacerbating the situation. Yes they face massive fines if not compliant, but somewhere there has to be some form of logic that is applied.

My sister is trying to open a Satrix account for her daughters. The fact that she is divorced and remarried has sent the administration into overdrive as she has a different surname to her daughters.

They now require an unabridged birth certificate to prove that she is in fact their mother so they can accept her utility bill as proof of residence. For some reason (that is really beyond reason) they also require a copy of the divorce contract. But the cherry on the top has to be that once they found out that their father had passed away, they asked for a death certificate. All of this for a R300 a month debit order.

And this is not just pointing fingers at Satrix, I will spare you my personal drama with Computershare in trying to sell my son’s Telkom shares .

My sister is gatvol and I think is on the verge of just spending the money — no one at a clothing store asks you questions when you hand over cash.

Prior to her Satrix debacle, she opened bank accounts for her daughters and although the FICA process required her older daughter to obtain a letter from her college as proof of residence, it was a far less complicated process.

The point is that they have just been FICA’d by a reputable financial institution, why should they have to go through this process every time? Calls have been made for a centralised FICA database where you only have to go through the red tape once.

If government is serious about getting savings off the ground, it needs to expedite this process or at least allow other institutions to accept a letter from the client’s bank confirming that they comply with FICA. But first prize would to allow a FICA exception for savings accounts below a certain value in the same way certain bank accounts are exempt. Encouraging children to save is the first step to developing a savings culture.

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