Monday, October 25, 2021

BoB, commercial banks and FIA violating customers’ privacy

If it is privacy you want, then stay away from commercial banks and stash your money under the mattress.

International money laundering experts have revealed that Botswana banks customers have lost their legal rights to privacy following a Bank of Botswana (BoB) instruction to commercial banks to file suspicious transaction reports with and Financial Intelligence Agency (FIA), it has emerged.

While the banks were supposed to file only “suspicious transaction reporting” with FIA as per BoBs’ instructions, some commercial banks file every bank transaction with FIA, experts from Eastern and Southern Africa Anti-Money Laundering Group who were assessing Botswana’s anti money laundering and counter terrorism mechanisms have found.

They also found that the two oversight institutions have broken privacy rules or overstepped their legal authority thousands of times each year since the bank instructed commercial banks to file their “Suspicious Transaction Reporting” with FIA.

Responding to Sunday Standard queries, FIA Director Abraham Sethibe conceded that there is need to amend the Banking Act which prohibits third parties from being in possession of commercial banks’ customer’s transactions.

“In terms of Section 17 of the FIA Act banks are mandated to report suspicious transactions to the FIA as such the mandate to receive suspicious transactions lies with the FIA not the Bank of Botswana, hence the need to amend the Banking Act,” said Sethibe.

The assessors found that more than 99 percent of the total suspicious transactions report filed with FIA were from the financial institutions, with the majority coming from commercial banks with an average of 83% for the period under review.

“This is despite the provisions of  the Banking Act which prohibit banks to exchange transaction information without seeking authorisation from the customer involved. Further, all banks filed STRs to the FIA only in direct contradiction of s.21 of the Banking Act which requires submission of the same to the BoB,” the assessors said.

The assessors found that the FIA received a total of 246 STRs from 2014 to June 2016, with most of the reports filed by banks.

Sethibe noted that since the provisions in the Financial Intelligence Act came into operation after the Banking Act, the provisions of Financial Intelligence Act takes precedence over the Banking Act.

He said in terms of the Section 4 (1) (a) FIA is the central authority responsible for requesting disclosures of financial information including suspicious transaction reports.

“Hence the filling of suspicious transaction reports with FIA is in accordance with the Financial Intelligence Act in particular section 17 which takes precedence over section 21 of the banking Act. It is also important to note that the Banking Act is being amended to remove section 21,” he said.

Still defending the decision taken by BoBs, Sethibe also cited section 29 (2) which states that “where provisions of an Act or instrument are inconsistent and the inconsistency cannot be resolved by construing the enactment as a whole, a provision which appears later in the enactment shall prevail an enactment.”

According to BoB’s Banking Supervision Annual Report, 2015, Botswana has a fair formal access to banking services with about 1.13 million accounts out of the 1.49 million being of the adult population.

The central bank had not responded to Sunday Standard queries at the time of going to press.

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