Kieswetter sends a warning to banks in South Africa

 ·1 Mar 2024

The South African Revenue Service (SARS) is prepared to take legal action against South African banks to emphasise their obligations to report questionable transactions made by clients.

This was the warning issued by SARS commissioner Edward Kieswetter, telling NewzroomAfrika that banks cannot plead ignorance regarding this responsibility.

“There are laws in our Financial Intelligence Centre Act that require banks to report certain transactions if they suspect they may be questionable,” Kieswetter said.

He added that banks get close enough to see the repeatability, the nature, and the volume of transactions.

“So my message to banks would be: you cannot simply follow this from a compliance tick-the-box perspective.” 

Instead, the commissioner clarified that banks must manage their duty from a “risk to the entire financial ecosystem” perspective.

He said banks may prefer not to know about suspicious transactions to avoid the need to take action.

However, Kieswetter noted as a general principle, he believes that this idea should be put to the test in a court of law.

“We are willing to pursue legal action to establish certainty by having the courts make a ruling on this principle,” he said.

Kieswetter’s comments come after the SARS served Sasfin Bank with a civil summons for R4.87 billion plus interest and costs in the form of a damages claim.

This summons followed an investigation conducted in 2023, which revealed that high-ranking officials at Absa, Standard Bank, and Sasfin Bank were involved in laundering millions of dollars in dirty cash in exchange for regular bribes from criminals.

Former foreign exchange clients of Sasfin are said to have worked together as a syndicate and colluded with Sasfin employees to carry out an illegal operation to transfer money out of South Africa.

As a result, SARS was unable to recover income tax, value-added tax and penalties that were allegedly owed by Sasfin’s former clients and, therefore, launched a summons against the bank for a sum of R4.87 billion.

However, Sasfin argued that it is unjust for banks to be held responsible for taxes their clients have failed to pay.

“The legal opinion is unequivocal that the claim falls outside of the recognised parameters of applicable law and has a very remote likelihood of success,” the bank said. 

This response came after the bank obtained a legal opinion from ENS, which stated that the claim falls outside of the recognised parameters of applicable law and has little chance of success.

“On the basis of this strong legal opinion, Sasfin Holdings concluded that the claim will not result in the recognition of any liability.”

“The board of directors of Sasfin Holdings remains of the view that SARS’ claim has no merit and has little chance of success.”

Therefore, the bank added that it would defend the claim, and given that this involves a defended trial action, the matter is only likely to come to trial in several years’ time.

Read: FNB sounds the alarm for consumers in South Africa

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