Courts last refuge from Hurricane JZ

When it comes to passing the Financial Intelligence Amendment Bill, the courts are set yet again to be the last stand against an onslaught from Hurricane Zuma.

After sitting on the Bill for six months, President Jacob Zuma sent it back to the National Assembly for reconsideration. He cited concern that the Bill’s provision for searches without a warrant in some cases was unconstitutional.

But the parliamentary standing committee on finance, as well as parliamentary and state legal advisers, believe that the Bill will pass constitutional muster.

The Democratic Alliance has decried the president’s referral as “suspicious, delay tactics” and has lodged an application seeking all the documents Zuma relied on before deciding to refer the Bill back to Parliament.

The chairperson of the standing committee, Yunus Carrim, had vowed that he and the committee will take the matter all the way to the Constitutional Court.

Carrim had a short but successful stint as minister of telecommunications before the president removed him as part of a wider Cabinet reshuffle, which also unseated Pravin Gordhan as finance minister.

A parliamentary legal adviser explained in a recent presentation to the committee that it cannot take such a step. Instead, it is the Constitution that will compel the president to sign the Bill into law.

Section 79 of the Constitution allows the president, if he has reservations about a Bill, to refer it back to the Assembly for reconsideration.

“If, after reconsideration, a Bill fully accommodates the president’s reservations, the president must assent to and sign the Bill; if not, the president must either assent to and sign the Bill, or refer it to the Constitutional Court for a decision on its constitutionality,” the legal adviser said.

“If the Constitutional Court decides that the Bill is constitutional, the president must assent to and sign it.”

But time is of the essence. South Africa, as a member of the Financial Action Task Force, an intergovernmental body developing and promoting policies to combat money laundering and terror financing, must make changes identified by the task force to bring its standards in line with best international practice.

South Africa was given an extension until February to report back on its progress. Parliamentary representatives will have to approach the task force for even more time.

If found to be noncompliant, South African financial institutions could have their relationships with foreign banks cut off. This would make cross-border transactions more costly and could affect the ability of local companies to do business overseas.

Since 1999, only 13 Bills have been referred back by a president. Zuma has referred back five: the Intellectual Property Laws Amendment Bill in 2012; the Protection of State Information Bill in 2013; the Mineral and Petroleum Resources Development Agency Amendment Bill in 2015; and, last year, the Performing Animals Protection Amendment Bill and the Financial Intelligence Centre Amendment Bill.

The FIC Amendment Bill has taken centre stage in another legal matter. The Reserve Bank’s registrar of banks, Kuben Naidoo, as a respondent in a matter filed by the finance minister, submitted an answering affidavit to the high court in Pretoria in late December.

The minister is seeking a declaratory order to say he cannot intervene in matters between banks and their clients.

This came after the controversial and politically connected Gupta family put pressure on the minister to intervene when all of the big four banks closed the accounts of their businesses last year.

In the minister’s founding affidavit, he revealed that the Financial Intelligence Centre had flagged 72 transactions relating to the Gupta accounts as being suspicious.

Naidoo’s affidavit states that he, as the registrar of banks, is not empowered to intervene in disputes between a bank and its client either.

But the bulk of his affidavit tackled the issue of the FIC Amendment Bill and the potential repercussions.

In his affidavit, he explains that the president referred the Bill back because, under section 45b of the Financial Intelligence Centre Act (Fica), clause 32 would allow searches without a warrant.

“Ironically, the current version of Fica provides that all inspections under section 45B of Fica will take place without a warrant. The Bill, by contrast, introduces the requirement that searches must be undertaken with a warrant and only in exceptional circumstance will warrantless searches be permitted.”

Naidoo also notes that the amendment Bill will require enhanced due diligence when entering into a business relationship with politically exposed people.

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