Big banks’ rand manipulation – concerns remain

Despite the case against South African big banks and their international counterparts for manipulating the rand falling apart, experts say there are still major concerns around the alleged irregular conduct and the lack of competence shown by regulators.

The Competition Appeals Court (CAC) dismissed charges against 23 banks and financial institutions implicated in the Competition Commission’s probe into alleged currency manipulation earlier this week.

The ruling dismissed the claims against some of South Africa’s largest banks, including Standard Bank, Nedbank, and FirstRand.

This leaves just Investec and the four foreign banks whose traders pleaded guilty to charges brought by the US Department of Justice years ago.

Investec remains in the case because it did not join the application to the CAC to prevent the case from going ahead.

The CAC dismissed the charges against some of the banks and financial institutions for various reasons.

This included a lack of jurisdiction to prosecute some international banks and an incorrect attempt to prosecute holding companies not involved in the alleged trades. 

In addition, some charges were dismissed for lack of evidence, with the court stating the commission should have been more thorough in setting out its case.

Managing director and chief economist at ESG Analytics Sifiso Skenjana told the SABC that the issue goes far beyond anti-competitive behaviour and should be explored outside the Competition Commission. 

Skenjana said the alleged irregular conduct by the banks should be investigated by the Financial Sector Conduct Authority (FSCA), the Financial Intelligence Centre (FIC) and SARS. 

This will clarify the matter and establish whether any manipulation did occur, not simply that the Competition Commission failed to build a proper case. 

“This is an issue broader than the competition, and I think it needs to be explored in a more complex and comprehensive way as these issues are highly technical,” Skenjana said. 

Regarding South Africa’s position on the Financial Action Task Force’s greylist, it is even more important that cases like this are investigated properly, he added. 

Professor at Wits’ School of Governance, Alex van den Heever, said his main concern is the inability of the Competition Commission to build a case and show their technical competency. 

“Whether or not there has been systematic manipulation of the rand has not been shown by the Competition Commission. If there was such manipulation, then they should have been able to investigate it and prove it,” he said. 

Van den Heever said this does not bode well for the future as bad actors will be able to get away with financial crimes as regulators have proven unable to pursue technically complex cases. 

“This means that manipulation and financial irregularities can continue because our array of financial regulators cannot address this issue in a competent manner that addresses problematic behaviour,” he added. 

“Are they able to do it in cases where people have not been basically fingered by US authorities? This, to me, is a serious concern.”

According to the CEO of Future Forex, Harry Scherzer, the ruling shows a major lack of transparency within the banking sector and raises concerns over the efficacy of regulatory oversights.

“It is highly concerning to see the likes of FNB, Standard Bank, and Nedbank being let off the hook due to a lack of direct evidence when Standard Chartered has already been fined for their wrongdoing, and many other international and local banks are still being questioned,” Scherzer said.

“Market manipulation of this scale is likely to involve most, if not all, of South Africa’s major banks, so it feels like a real let-off, and it’s likely due to the size of the legal teams of these banks.”

“The public deserves transparency and confidence in the financial system, and decisions like these erode the trust that citizens place in the banking system as well as the regulatory bodies that govern them.”

In a statement following the ruling, Standard Bank said it “has always maintained that the Group is wholly committed to the rule of law, respects the important role of institutions, and upholds South Africa’s Constitutional democracy, and our Constitutional obligation to ensure that our country improves the quality of life of all citizens.”

In its ruling, the Court concluded that the case against Standard Bank “does not get out of the legal starting blocks”.

Standard Bank said it remains committed to supporting the work of regulators, including the Competition Commission.

“Standard Bank reiterates its belief in and respect for South Africa’s institutions generally and its well-functioning and sound judicial system.”