FSCA to publish findings on racial profiling allegations against banks

The Financial Sector Conduct Authority (FSCA) is set to publish the outcomes of an investigation into allegations of racial profiling and discriminatory practices by banks “shortly”.

This follows media coverage of the apparent issue as well as findings by the Zondo Commission that banks were participating in this practice. The FSCA indicated, in response to written questions on the progress being made with the Conduct of Financial Institutions (COFI) Bill, that it had investigated the issue.

The FSCA said it has “identified several areas for improvement in banks’ processes, procedures and decision-making arrangements”. It noted that its review took place between 2022 and 2024.

Its areas of improvement were identified even though it found no “credible evidence supporting the allegations of intentional profiling and unlawfully discriminatory practices”.

COFI intends to revamp the regulatory framework for financial institutions by consolidating conduct regulations into a single piece of legislation, effectively protecting consumers, promoting fair treatment, as well as a fair, transparent, and efficient financial ecosystem.

That law, said the FSCA, will be “submitted to Cabinet shortly for approval for tabling in Parliament. It has been in development in one form or another for a decade.

Law firm ENS explained that “Judge Zondo stated that it is unacceptable that an institution as powerful as a bank should have no obligation to hear what a client has to say before the bank may close the client’s account on suspicion that the client may be involved in illegal or corrupt transactions”.

The Zondo Commission, which ran between 2018 and 2022, found that banks were instrumental in facilitating state capture, including money laundering, asset concealment, and corruption-related transactions. It noted that they facilitated suspicious transactions without adequate preventative measures and didn’t report suspicious activities to the relevant authorities.

Among the findings was that there was improper intervention to prevent closing accounts belonging to Gupta-owned companies, the Public Affairs Research Institute noted.

Law firm ENS explained that Judge Zondo found that the Inter-Ministerial Task Team chaired by Mosebenzi Zwane, then Minister of Mineral Resources at the time serving in the Zuma administration, improperly tried to stop Gupta bank accounts from being closed. “Judge Zondo also found that former President [Jacob] Zuma’s conduct in relation to the closure of the Guptas bank accounts was in breach of the Executive Members Ethics Act,” said ENS.

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