#RacistBanksMustFall calls for legislative reform after US tackles political debanking

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.

#RacistBanksMustFall, applauded the recent move by US President Donald Trump to combat debanking practices, urging South Africa to follow suit and introduce similar protections for its citizens.

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.

Debanking is an umbrella term for when a bank rejects a customer, which can happen for any number of reasons. Americans don’t have a legal right to a bank account, and lenders often turn away people or businesses to comply with a mountain of rules and regulations designed to protect the financial system.

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

Trump also said the country's top two lenders had previously rejected his deposits, ramping up his attack on the industry.

"They totally discriminate against, I think, me maybe even more, but they discriminate against many conservatives," he told CNBC in an interview.

"They did discriminate," Trump said of actions taken by JPMorgan after his first term in office. "I had hundreds of millions, I had many, many accounts loaded up with cash ... and they told me, 'I'm sorry sir, we can't have you. You have 20 days to get out.'"

In South Africa, the issue has become a contentious political and social topic. Local 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, has been a vocal critic of what he perceives as a systemic issue within South Africa's banking sector. "South African banks have been selectively racist and are using the banking institution to target and silence political dissents," Nchabeleng said. He pointed to the case of Dr Iqbal Survé, a 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.

Nchabeleng said America's move to tackle debanking was a positive development to come out of the Trump administration amidst all that impasse around Trump’s tariffs war. A similar process ought to be instituted here in South Africa regarding the draconian banking practice of closing accounts of targeted individuals for political reasons.

"Indeed the chickens are now coming home to roost. What the US President Donald Trump is doing by introducing an executive order that will be taking on the banking institution for having targeted and discriminated against him and other conservatives for political reasons is encouraging. For long now the banks have been doing as they wish."

South Africans banks are no different, he said.

According to Nchabeleng, banks selectively target and close down banking accounts and facilities of certain high profile individuals in society purely for political reasons, which he said was "racist and discriminatory". He said the process violated the South African constitution and trampled on legal rights of citizens’ access to financial services.

Critics of the banking sector also highlight how this practice disproportionately affects South Africa’s most vulnerable. Nchabeleng said the same practice also gets extended towards the most poor and vulnerable in South Africa's society.

"Local banks have unilaterally bankrupted lots of families and auctioned off person assets and homes of many South Africans. In some instances auctioning off and closing accounts of South Africans without any due cause except that that particular individual is politically deemed a reputable risk client," he said.

Nchabeleng said banks must be called into line and brought to account.

"It is high time the banking institution stops its discriminatory practices," he said. 

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, “In a globalized financial world, workers and employers’ ability to bank and access their wages and funds and pay bills is critical to their livelihoods and ability to live.  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.  South African consumers have the right to take any bank to court when they feel their rights have been undermined by them and many have done so and won.  More must be done to ensure the Banking and Consumer Ombudsman are available to ordinary workers who cannot afford to hire lawyers when taking matters to court.

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.

In February, Parliament hauled the FSCA over the coals about the lax manner in which they were treating the unilateral and arbitrary closure of bank accounts. Parliamentary standing committee on finance chairperson, Joe Maswanganyi, said transformation within the financial sector is not merely an option but a constitutional and economic imperative.

In his final State Capture report, retired Chief Justice Raymond Zondo recommended that relevant existing legislation governing banks be amended to introduce a requirement of fairness or, if warranted, a new piece of legislation to be enacted to compel the banks to afford the client a proper opportunity to be heard before their accounts were closed.

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