After US action on political debanking, #RacistBanksMustFall calls for reform in South Africa

The #RacistBanksMustFall movement in South Africa has called for immediate legislative intervention in the wake of a US executive order designed to prevent banks from closing accounts based on political or religious beliefs.

The Trump administration’s executive order, expected to be signed this week, aims to tackle the controversial practice of debanking, where financial institutions deny services to individuals or businesses based on political affiliation.

The order directs federal banking regulators to remove vague "reputational risk" guidelines that have often been used to justify account closures, particularly targeting conservative and crypto industry figures in the US.

Reuters reported Trump as saying he believes that banks, including JPMorgan and Bank of America discriminate against him and his supporters.

In South Africa, banks, including major institutions like Nedbank, have come under fire for selectively closing accounts under the guise of "reputational risk".

Nedbank's 2023 annual report revealed that it had closed accounts for nearly 200 individuals and businesses, a practice that critics argue is politically motivated and disproportionately targets dissenting voices.

Among the most high-profile cases is that of Sekunjalo Group, which has fought against the closure of its bank accounts, claiming that the action is part of an ongoing effort to silence politically inconvenient businesses and individuals.

Campaign leader of #RacistBanksMustFall, Crown Prince Adil Nchabeleng, said: "South African banks have been selectively racist and are using the banking institution to target and silence political dissents."

He pointed to the case of Dr Iqbal Survé, prominent businessman and media mogul, whose companies have faced repeated account closures by South African banks, claiming they were seen as a "reputational risk" due to Survé's political views and media influence.

According to the current regulatory frameworks, banks are obliged to notify customers and provide them with the opportunity to make representations before terminating their accounts.

In South Africa, the Supreme Court of Appeal in Bredenkamp v Standard Bank set the standard for the unilateral termination of the bank-customer relationship on the grounds of reputational risks. 

The judgement sets out several principles South African banks have relied on when terminating relationships with their customers.

Over the years these principles have been challenged in courts, where customers have instituted legal proceedings to prohibit banks from closing their accounts, requiring banks to keep accounts open against the banks' wishes.

Cosatu Parliamentary Coordinator, Matthew Parks said, “The rights of banking consumers in South Africa is guided by the Financial Intelligence Centre Act.  It is critical that such legislation is clear with regards to consumers’ rights and banks’ obligations."

The Financial Sector Conduct Authority (FSCA) is moving forward with the Conduct of Financial Institutions (COFI) Bill, which aims to provide a fair process for bank account closures, following a series of delays.

Cape Argus