As increasing numbers of MMM users complain about not being able to get cash from other participants, South Africa’s top five banks have responded to a Fin24 query regarding MMM banking activity.
The MMM platform, which has been shunned as a ponzi scheme by most financial experts and organisations, has attracted a lot of support from South Africans drowning in debt. However, many users are starting to realise the scheme might not work so well, as the anonymous leaders of the scheme froze many accounts recently.
Fin24 user Thandekile told Fin24 on Thursday that she has been blocked access to getting money from other users for two months.
“I didn’t get my money I deposited on the 4th of April,” she said. “I claimed it on the 4th of May and nothing happened until today – I don’t think I will get it.”
The big question is how South Africa’s banks – whose bank accounts are being used to transfer MMM money from one user’s account to another – are reacting.
Capitec [JSE:CPI] CEO Gerrie Fourie told Fin24 in May that the bank has shut down over 2 000 accounts. Capitec head of communications Charl Nel added that“the onus is then placed on the client to prove that the activity on the account is not fraudulent”.
Fin24 reached out to the top five banks of South Africa to find out if they follow Capitec’s strategy.
This is what they told Fin24:
1. Nedbank [JSE:NED]
“Nedbank has identified accounts linked to the scheme,” said Ebrahim Jadwat, head of credit risk monitoring at Nedbank. “The volumes are insignificant.
“Processes were put in place some time ago to prevent such accounts from being opened. Existing accounts are being managed appropriately on an individual basis.”
2. Absa [JSE:ABSP]
“Absa takes a zero tolerance approach to any criminal or fraudulent activity,” said an Absa spokesperson.
“While we conduct the necessary due diligence at the time an account is opened, we also investigate all suspected fraudulent or criminal activities that are either brought to our attention or which are detected by our internal systems and processes.
“Where necessary, the appropriate action is taken in line with our policies and existing legislation.”
“We are unable to respond in detail to your questions on the basis that the information sought is confidential and may be proprietary in nature,” an FNB spokesperson said.
“First National Bank (FNB) complies with all laws relevant to the operation of accounts held by the bank.
“We employ significant resources to ensure that the bank meets its compliance requirements in terms of all applicable legislation.”
4. Standard Bank [JSE:SBK]
“We don’t comment on whether or not we hold accounts on behalf of customers,” said Standard Bank spokesperson Ross Linstrom.
“The bank complies with its regulatory obligations as set out in the applicable legislation.”
5. Investec [JSE:INP]
“Investec does not have exposure to MMM,” said Ursula Nobrega, head of investor relations at Investec.
Sarb praises banks for sticking to rules
While many of the banks remained guarded about their exposure to MMM, the South African Reserve Bank (Sarb) told Fin24 that MMM is being investigated.
“The scheme was referred to the National Consumer Commission and it is a matter of public record that the scheme is currently under investigation by the Hawks,” Bulelwa Boqwana, chief of staff at the Sarb, told Fin24 on Monday.
The Sarb said the public are encouraged to transact with accredited financial institutions, which are regulated and supervised by either the Sarb, the National Credit Regulator, National Consumer Commission or the Financial Services Board.
“Given our regulatory and supervisory responsibilities and the sensitive nature of the investigations we conduct, the Sarb does not discuss current or potential investigations in the media,” said Boqwana.
“However, it is common cause that the Sarb as part of its supervisory role, conducts routine inspections on all banks to ascertain their levels of regulatory compliance.
“This includes compliance with the FIC (Financial Intelligence Centre) Act, among others,” said Boqwana. “The conclusions of such inspections are discussed with the banks concerned and where there is a need for remedial action, plans to implement such actions are also discussed.
“It is the Sarb’s view that the banking sector has a very high level of adherence to the regulatory/legislative framework applicable to them.”
In its 2015 annual review, the bank supervision department at Sarb said 19 suspected illegal schemes were still active, after the finalisation of 22 schemes during the year under review.