Proposed banking legislation to allow more scrutiny of politically exposed people, including senior government officials, is one of the reasons the treasury found itself isolated and under attack, said former finance minister Pravin Gordhan.
In his affidavit before the Zondo commission into state capture, Gordhan details how some of his own Cabinet colleagues resisted — and even attacked — treasury for looking into dodgy dealings. He did not name the colleagues.
They also put pressure on treasury to dump crucial amendments to the Financial Intelligence Centre Act (Fica), which would give government more power to scrutinise the banking affairs of individuals considered to be politically exposed persons, including politicians and connected business people.
Other ministers sought to wrestle the Finance Intelligence Centre (FIC) from treasury, he said.
After resistance from then-president Jacob Zuma, which resulted in litigation, the amendment Bill was passed into law in May by then finance minister Malusi Gigaba.
Ironically, it was the scrutiny of the movement of the controversial Gupta family’s money under laws that already existed that led to the beginning of the fall of state capture.
In December 2015 and early 2016 South Africa’s four main commercial banks — First National Bank, Absa, Nedbank and Standard Bank — informed the family they could no longer bear the risk of carrying their bank accounts, as well as those of their businesses. This was a result of unexplained and frequent movements of large sums of money between the companies, as well as outside of South Africa.
South Africa is signatory to the Financial Action Task Force, an international organisation that sets standards to combat illicit flows of money.
But the proposed amendment to banking legislation “saw a concerted effort by other members of the executive in the security cluster [ministries of defence, police, justice and correctional services, home affairs, state security and finance] to undermine treasury’s oversight of the FIC. There appeared to be an effort to move FIC, and presumably access to its highly sensitive personal information, to the security cluster. This was concerning since the FIC plays such an important role in the fiscal and banking regulatory environment overseen by national treasury,” said Gordhan.
“Former president Zuma also delayed signing the amendments into law until litigation was commenced to force him to do so.”
At the time, the Gupta family, close friends of Zuma and his son’s business partners were extremely critical of the amendments and even lobbied Zuma to refuse to sign it into law, he said.
Gordhan said the family also attacked treasury through analysts Mzwanele Manyi, Tshepo Kgadima and Danisa Baloyi on their news channel, ANN7.
“At the parliamentary hearing held in January 2017, these same critics objected to the Bill. My Cabinet colleagues in the security cluster also met officials from national treasury to raise their objections to the amendments as well,” he said.
The amendments to Fica required financial institutions to know their customers better, to do proper due diligence, and consider beneficial ownership of companies and trusts.
Risky customers are required to provide information about the sources of their wealth. The Guptas’ concern was specifically about enhanced scrutiny of politically exposed persons and prominent or influential persons, groups that include foreign politicians and public officials, as well as domestic politicians, senior government officials, and persons in companies doing business with government.
Gordhan is due to appear next week before the state capture commission chaired by judge Raymond Zondo.
In his affidavit, which appears to have been widely distributed, Gordhan also details numerous interactions with Zuma, during which Zuma seemed to ignore or disregard due process in efforts to push specific questionable deals that would have benefitted him and his cronies.
His affidavit also details how treasury faced unprecedented attack, for probing corruption, from Denel board chair Daniel Mantsha and fellow Cabinet minister (then of social development) Bathabile Dlamini.
Gordhan said that the National Prosecuting Authority and the Hawks, the police’s elite crime fighting unit, were used to target and intimidate him. This included former Hawks General Berning Ntlemeza asking him to answer 21 questions related to a criminal investigation just before he was to deliver his budget speech in 2016 when he was the minister of finance.