‘Absa was right to wait 15 months before closing Gupta accounts’

Reserve Bank deputy governor Kuben Naidoo on Tuesday justified Absa’s decision to wait 15 months before it closed down the accounts of Gupta-owned companies, saying the megabank couldn’t just sever ties with the controversial family solely on the basis of suspicion.

Naidoo appearing before parliament’s finance and trade and industry committees – during public hearing on the transformation of the financial services sector – was asked by DA finance spokesperson David Maynier why the bank took a decision to terminate services to Oakbay Investments companies on November 18, 2014, but only formally acted on February 16, 2016.

The deputy governor said the country’s financial laws prohibited banks from closing down their client’s accounts on the basis of just suspicion, saying Absa was right to take its time before taking action.

He underscored that closing down clients’ accounts should not be standard practice among banks, as they were required by law to probe further any misgivings they might have about account holders. He also said banks were not allowed to publicly disclose any investigations into their clients.

In December last year, FNB become the first bank to reveal why it had closed the accounts of the politically exposed family in court papers.

FirstRand CEO Johan Burger said at the time there were suspicions that the Guptas’ accounts were being used to launder money, and due to the associated reputational and business risk of doing business with the family which is dodged by “state capture” allegations.

Burger made submissions in Finance Minister Pravin Gordhan’s 2016 court application seeking a declaratory order and protection from the Pretoria High Court that there was no law that empowered him to interfere in the decision by the country’s four major banks to close the Guptas’ accounts.

Gordhan’s application was filed in October and it named 72 “dubious and unusual” transactions adding up to R6.8 billion by the family’s companies. The Guptas have previously described the minister’s court action as “superfluous”, saying it is being used to mount a political smear campaign against them.

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