If your bank statements are still being posted to an address that is no longer your residence, your bank account could be frozen, according to the South African Banking Risk Information Centre (SABRIC), which has urged South Africans to update their personal details with their bank.

In terms of the Financial Intelligence Centre Act (FICA), banks must have the correct customer information to ensure FICA compliance. ‘Know Your Customer’ (KYC) documents include, among others, identity documents and proof of address.

“Banks are compelled, under law, to enforce strict measures when they do not have accurate and up-to-date information about their customers. Such measures could include the freezing of a customer’s account,” said SABRIC CEO, Kalyani Pillay in a statement.

“The freezing of bank accounts is the last resort banks wish to undertake, and therefore customers are urged to provide the necessary legally required KYC documentation, not older than three months, to their respective banks without delay,” she stressed.

However, Marelise van der Westhuizen, a director at Norton Rose Fulbright South Africa, warns that there have been several court judgements against banks that froze their customers’ accounts, where they did not in fact have legislative grounds to do so.

“Unless a bank is entitled to freeze a customer’s bank account in terms of its contract with that customer, the bank has to be given an intervention order by the Financial Intelligence Centre (FIC) in order for it to have legal grounds on which to do this,” Van der Westhuizen explained.

Van der Westhuizen said banks are caught between a rock and a hard place in an attempt to carry out the Sarb’s undertaking and avoid being fined, while also facing increasingly litigious customers where they do exercise the Sarb undertaking.

“The banks are not only doing this for compliance purposes, but also to minimise customers’ exposure to bank crimes such as fraud, identity theft and cybercrime,” Pillay insisted.

In a Tweet sent out on Wednesday, SABRIC noted, “If a bank customer is not sure of their FICA status, they should contact their account or relationship manager to find out”.

What is FICA?

Government introduced FICA in 2001 to combat financial crimes such as money laundering, tax evasion and terrorist financing activities. It is also intended to protect bank customers from fraud and related activities.

Under FICA, the South African Reserve Bank (Sarb) fined the country’s four largest banks a collective R125 million last year for failing to implement adequate anti-money laundering controls.

More recently, Deutsche Bank and Capitec were fined under FICA for lax controls.

Unfortunately, often banks themselves discover a certain breach of the Act within their operations, which they then duly report to the Sarb only to be fined for being transparent. Whether or not this encourages transparency, rather than simply hiding and fixing these errors before the Sarb finds out, remains to be seen.

Meanwhile, executive director of the Free Market Foundation, Leon Louw describes FICA as a “monumental failure that should be scrapped”.

“We fund an entirely new profession: “compliance officers”. Virtually no one knows why Fica became part of their lives. Policy makers do not know what compliance and its enforcement costs, who ultimately pays, or whether whatever benefits there might be justify those costs,” Louw comments.

Pillay insisted that FICA and KYC promote a safer and more secure financial sector. Van der Westhuizen agreed that countries need effective anti-money laundering laws, but said they could be made more effective.

Marcel Klaassen, head of growth at FNB Business, on Wednesday Tweeted: “Don’t ignore #FICAcompliant communications from your bank. You will never be asked for sensitive banking information. Heed the call to action.”

Author: Hanna Barry