SA banks assert compliance with terror funding laws

The chief rabbi of South Africa, Dr Warren Goldstein, has come out guns blazing following recent international media reports revealing that leading South African banks may be providing a funding platform for terror group Hamas.

He has issued a firm warning to banks in the country who may potentially be enabling payments to Hamas and other affiliated organisations via accounts set up by so-called charity organisations.

Research conducted by The Jerusalem Post uncovered what it said “appears to be a network of several South African organisations and straw-man companies deeply involved in funding Hamas activities through the Al-Quds Foundation, an international group sanctioned by the United States and outlawed by Israel, using accounts registered in major local South African banks: Standard Bank, Nedbank, and Absa”.

The chief rabbi has written to the chief executives of the three banks to give them “the opportunity to come see me to provide assurance and proof that these allegations are without merit”, he said in a video released on YouTube which has gained enormous traction on social media. This in the wake of last week’s International Court of Justice ruling.

“Failing this, I’ve warned them that there are numerous local criminal and international anti-terror laws here that they may be contravening. I will personally pursue this case on every forum to hold them accountable.”

Speaking to the SA Jewish Report, Goldstein said, “This is of vital importance because terror organisations like Hamas cannot perpetrate acts of violence and murder without funding. And so those who make it possible for them to access funding are aiding and abetting the terrorists who continue to target Israel.

“The banks must be given the opportunity to answer for themselves, but with real information provided, not hiding behind pro-forma denials and obfuscation. If they are innocent, they should be able to show that. And if they aren’t, then they must face the consequences. Closing down the availability of funding platforms for terror will protect Israel and make this country safer for all South Africans.”

In response to questions put to them, all three banks have this week issued statements expressing their firm commitment to combating the financing of terrorist activities.

Absa, which according to The Jerusalem Post may have created stumbling blocks for the Al-Quds Foundation, thereby leading to the accounts being opened elsewhere, told the SA Jewish Report, “In adherence to stringent local laws, such as the Financial Intelligence Centre [FIC] Act and international standards set by the Financial Action Task Force [FATF], we rigorously implement a range of measures to ensure that we adhere to local and international laws, policies, rules and requirements relating to international sanctions and prohibited business activity. These include thorough customer due diligence processes, regular monitoring of transactions, stringent record-keeping, and the reporting of any suspicious activities. We ensure that our operations aren’t only in full compliance with these legal requirements, but also contribute proactively to global efforts in preventing financial channels from being misused for terrorist purposes.”

In February 2023, the Paris-based FATF took the decision to include South Africa on its “grey list”, thereby classifying it as a jurisdiction under increased monitoring.

Grey listing is a practice where a country with serious anti-money laundering (AML) and counter-terrorist financing (CTF) deficiencies is publicly identified and subjected to increased monitoring by the FATF.

Asked whether it was feasible that banks could unwittingly become involved, a leading industry insider who wishes to remain anonymous said, “This is highly likely.”

“We know that South Africa is a hotbed for terror funding and money laundering. Illicit money flows is one of the main reasons for the FATF grey listing,” the source said.

“The banks don’t necessarily know that they are providing a platform for Hamas or terror funding, but they can somehow become enablers, forming part of a whole complex money laundering web in which funds are moved and shuffled with relative ease around the world.”

He said the FIC in South Africa was “defunct”, state capture being one of the primary reasons.

“It’s easy to buy a shelf company that’s statutorily registered, get FICA approval, and transfer payments anywhere in the world. When a financial institution regards a transaction as suspicious for whatever reason, it’s obliged to file a suspicious transactional report with the FIC. It’s unlikely anything will happen thereafter,” he said.

“Terror organisations use counterfeit goods, distributed and sold primarily by the informal trading sector. This provides the perfect platform for terror funding using illicit trades with the use of alternative payment systems such as Hawala, an informal method of payment based on trust, and is the most well-known way to facilitate massive outflows of cash on a daily basis amounting to billions of rands a year.”

To avoid detection, money is transferred in small remittances that don’t raise eyebrows, he said.

“There’s a complete breakdown in law enforcement and intelligence structures, which makes South Africa attractive for dubious business dealings. None of this is surprising.”

A Johannesburg-based forensic accountant, who also preferred to remain anonymous, said, “Recent media reports support why South Africa was grey listed in the first place. There must have been strong indication of cross border money laundering and terror financing. Sadly as a consequence, banks have become extra cautious and it has become difficult for the honest man in the street to transact. However, it still appears as if organisations with criminal intent manage to continue operating. At the end of the day, the banks have a lot to answer for about whether they are taking enough precautions to prevent this sort of thing. All will be revealed if and when South Africa is removed from the grey list.”

Towards the end of last year, Finance Minister Enoch Godongwana said the country was making good progress in addressing all the deficiencies identified by the FATF by early 2025. He said, “15 of the 20 technical deficiencies” in the country’s legal framework to “fight against organised crime and illegal financial flows” had been addressed, and it hoped to be off the grey list soon.

A Nedbank spokesperson told the SA Jewish Report that the bank had noted “several unsubstantiated allegations” on different media platforms related to alleged financing of terrorist activity.

“We want to assure our stakeholders that Nedbank has a comprehensive risk management and compliance plan in place which is aligned with international standards to combat money laundering, terrorist financing, and proliferation financing. We strictly adhere to sanctions and related legislation, and are confident that our risk management controls and reporting obligations are robust. Should we become aware of any illegal or suspicious activity in client accounts, we don’t hesitate to take the necessary action in terms of our processes and in line with the relevant legislation.”

Standard Bank told the SA Jewish Report that it abided by the laws of the jurisdictions in which it operates, including AML and CTF regulation, and took its duty of care with regards to compliance “extremely seriously”.

The banks all said customer confidentiality prohibited the disclosure of clients’ details.