Child savers are royally fica'd
When it comes to our household finances, South Africans are caught between to two national policy objectives: fighting crime and improving savings.
Humans are by their very nature downstream swimmers. If something is difficult, we are unlikely to pursue it, which is why it is easier to spend money than to save it.
These were the philosophical thoughts, alongside far more violent ones, that were going through my mind on Saturday morning as I argued with a Nedbank consultant about why my existing documentation should be sufficient to open a savings account for my children.
My experience is shared, no doubt, by thousands of other South Africans who have encountered the numerous interpretations by bank consultants of the Financial Intelligence Centre Act (Fica).
The bottom line is that legislation that requires savings products to adhere to the Fica, the Fais (Financial Advisory and Intermediary Services) Act and the Banking Act turns the simple act of opening a savings account for children into a red-taped bureaucracy that includes a staggering number of forms to be signed.
Considering that research and experience have shown that teaching children to save from a young age has a greater impact on financial literacy than teaching an adult how to calculate compound interest, surely we can find a way to make savings products for children more accessible?
A starting point is to question why a child’s savings account cannot qualify for exemption from the Fica. Christopher Malan, senior manager of compliance and prevention at the Financial Intelligence Centre, said that children’s accounts had in the past been used to avoid tax and money launderers today could use them to nefarious ends. The problem arises when the bank sees unusual activity ocurring on the bank account and asks the centre to investigate. Without the proper paperwork, this becomes difficult.
Malan said the purpose of the Fica was, ultimately, to create a paper trail that would assist in apprehending a criminal.
“The intention is not to create a wad of paper just lying there, but to produce information that can be used if a problem occurs in the future,” said Malan, who admitted that the Fica aimed to create as many hurdles and paper trails as possible for potential criminals.
The problem is that it creates exactly the same hurdles for would-be savers, especially when there is an over-zealous interpretation of the Fica by the staff employed by financial institutions. Banks are not always the worst offenders; just try opening a Satrix account for your teenager or getting your child’s Telkom shares ficaed by Computershare.
Another frustration is that only a parent or legal guardian may open an account for a child. Well-meaning grandparents or relatives can only contribute to a child’s savings account, not open it. Malan said that, again, this was because of potential abuse by syndicates.
What documents are accepted?
According to Fica, many documents can be used as proof of address, including certified copies of the original, such as a utility bill with a postal address that has the stand number and suburb on it as well as emailed statements.
Moreover, an existing client who wants to open a bank account for a minor should be able to use their existing Fica status with the bank, reducing the paperwork.
Anton de Wet, the managing executive of client engagement at Nedbank, said all of these documents were accepted at Nedbank and that existing customers whose Fica documents were up to date could use their details to open accounts for their children under the age of 18.
The problems arise as a result of staff communication. Although staff are trained on a regular basis, a new consultant may face a situation with which they are not familiar and simply refuse to open the account. Bank consultants are too afraid to use their initiative or logic in case they step outside the law.
- Despite its impact on savings, the Fica is a fact of life and the best way to manage it is to be forewarned. According to the Financial Intelligence Centre’s Christopher Malan and Jerome Bagley, the head of governance and compliance at Nedbank, the following documents are acceptable:
- Any document that confirms your physical address. This can include a lease, utility bills that have your erf, stand number and township name as well as deeds of transfer;
- The document cannot be more than three months old, except in the case of a lease agreement;
- The document can be a certified copy;
- Emailed statements can be used, although not printouts from the internet;
- For minors, ideally a birth certificate, although an ID book will be accepted as well as a passport. According to Nedbank’s processes, the passport must not expire within the following two years; and
- In the case of a legal guardian, a letter confirming guardianship is needed.