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THE FINANCIAL SERVICES TRIBUNAL

 

Case No. A37/2023

 

In the matter between:

 

MAHLUBANDILE MAKUZENI	Applicant
And
FINANCIAL SECTOR CONDUCT AUTHORITY	Respondent

 

Tribunal Panel: Judge D Davis, Adv M Holland and Adv G Goedhart SC

 

Appearance for the applicant:                   In Person

 

Appearance for the first respondent:         Mr B Bredenkamp

 

Date of hearing:                                       27 May 2024

 

Date of decision:                                      18 July 2024

 

Summary:  Application for Reconsideration of debarment on grounds of dishonesty by the Financial Sector Conduct Authority in terms of section 230 of the Financial Sector Regulation Act, 9 of 2017 – application for reconsideration dismissed.

 

DECISION

 

INTRODUCTION

 

1.               The applicant lodged an application for reconsideration in terms of Section 230 of the Financial Sector Regulation Act, 9 of 2017 (“the FSR Act”) of the respondent’s decision to debar him. The respondent issued a debarment notice in terms of Section 153(1)(a) of the FSR Act on 2 October 2023.

 

2.               Section 153(1)(a) of the FSR Act provides:

 

“153. Debarment –

 

(1)                      The responsible authority for a financial sector law may make a debarment order in respect of a natural person if the person has –

 

(a)                         contravened a financial sector law in a material way.”

 

3.               In terms of the debarment notice, the applicant is prohibited for a period of five years from:

 

3.1.              Providing, or being involved in the provision of, any financial products or financial services to financial customers;

 

3.2.              Acting as a key person of any financial institution;

 

3.3.              Providing specified services to a financial institution, whether under outsourcing arrangements or otherwise.

 

BACKGROUND

 

4.               The applicant was previously employed by Nedbank as a bank teller at its retail branch situated at Boxer Cacadu. His debarment followed pursuant to a report received by the respondent from Nedbank dated 4 May 2022 (“the Nedbank report”) regarding the applicant’s conduct on 20 May 2021. The applicant resigned on 21 May 2021, the day after the events giving rise to the debarment.

 

5.               The background as appears from the Nedbank report is as follows:

 

5.1.              On 20 May 2021 and at Boxer Cacadu, the applicant assisted a person masquerading as a deceased client of the bank, the late Mr KJM. Mr KJM’s home branch was Rosebank.

 

5.2.              The applicant changed the contact details of Mr KJM to that of the imposter and activated the Money App for the imposter on Mr KJM’s profile resulting in the imposter being able to add beneficiaries to account number 1958***231, held in the name of Mr KJM. The applicant also increased the daily transfer limit on Mr KJM’s account.

 

5.3.              Consequent upon the applicant’s conduct, the imposter then transferred funds into two FNB accounts. An amount of R200 000.00 was paid into one FNB account and a further R300 000.00 was paid into a second FNB account. R486 371.61 was recovered from FNB with the result that the actual loss suffered by Nedbank was an amount of R13 628.39.

 

5.4.              The applicant had failed to authenticate the imposter by means of biometrics and, despite the Nedbank system flagging the fact that Mr KJM was deceased, he nonetheless proceeded to assist the imposter to obtain access to Mr KJM’s account. He had not made any attempt to call the Rosebank branch where Mr KJMs account was held.

 

5.5.              Camera footage available at the Boxer store branch on 20 May 2021 showed that the applicant was talking to the imposter and handling his cellular phone outside the branch at the entrance of the Boxer store.

 

5.6.              Whilst the applicant denied that he had met the imposter before, a co- worker of the applicant confirmed that he had assisted the imposter previously on 9 April 2021.

 

5.7.              The applicant had been found guilty of gross misconduct (dishonesty) by Nedbank on 18 August 2022.

 

RESPONDENT’S FINDINGS

 

6.               Pursuant to its investigations, the respondent found that the applicant had deliberately failed to authenticate the imposter and had failed to act honestly. As a result, the respondent found that the applicant contravened the following Financial Sector Laws:

 

6.1.1.      Section 8A of the Financial Advisory and Intermediary Services Act, 37 of 2002 (“the FAIS Act”) read with Section 8(1) of Board Notice 184 of 2017: Determination of Fit and Proper Requirements for Financial Services Providers (“BN194”),[1]

 

6.1.2.      Section 2 of the General Code of Conduct for Authorised Financial Services Providers (“FSPs”) and representatives (“the General Code”);[2]

 

6.1.3.      Section 3(1)(d) of the General Code.[3]

 

GROUNDS FOR RECONSIDERATION

 

7.               The crux of the applicant’s grounds of complaint is that the respondent did not investigate his version and had only considered Nedbank’s side with reference to the Nedbank report.

 

8.               The applicant took issue with the fact that he was not provided with the minutes, annexures and evidence pack of the disciplinary hearing conducted by Nedbank, and that the respondent had failed to have regard to these documents and to listen to the minutes of the hearing, with the result that his version was not heard by the respondent. He contended that his defence lay in the minutes and annexures of the hearing which Nedbank had not provided.

 

ANALYSIS OF GROUNDS FOR RECONSIDERATION

 

9.               The applicant’s grounds for reconsideration do not deal with the merits of the debarment decision of 2 October 2023.[4]

 

10.           Paragraph 8(2) of BN194 provides that in determining whether a person complies with the fit and proper requirements relating to honesty, integrity and good standing (which applies to the applicant), the respondent may refer to “any information” in possession of the respondent or brought to the attention of the respondent.

 

11.           Nedbank, as the applicant’s employer, was not only in the best position to carry out the investigation into the applicant’s conduct but was duty bound to do so having regard to its obligations under section 14 of FAIS.

 

12.           The respondent was entitled to rely on the information placed before it by Nedbank, with due regard to paragraph 8(2) of BN194 and section 153 of the FSR Act. The applicant was afforded two opportunities to answer to the complaint, and to set out his defence in response to the respondent’s intended regulatory action as appears from the respondent’s letter to the applicant dated 15 December 2022[5] and the email of 10 February 2023.[6] Thus, the respondent did not rely solely on the Nedbank report, but also had regard to the applicant’s responses.

 

13.           In his initial response, the applicant requested a stay of the debarment process until his challenge to the post-determination hearing was finalised. He further advised that he was not in a position to make full submissions to the proposed debarment as he had not been furnished with the minutes, recordings or the evidence pack of the hearing from Nedbank.

 

14.           The disciplinary proceedings against the applicant are to be distinguished from the proceedings against the applicant in terms of Section 153(1)(a) of the FSR Act. The respondent is not bound by the outcome of disciplinary proceedings, and the applicant was not prohibited from putting forward his full response to the charges.

 

15.           In his reply to the respondent dated 13 February 2023,[7] the applicant stated that:

 

15.1.         The client came with his ID and documentation from Home Affairs. There was no death certificate to prove that he is deceased;

 

15.2.         On the system he used to service and verify clients (Eclipse) there were no alerts or notification that he was deceased;

 

15.3.         He had followed the Nedbank process to verify and assist the client;

 

15.4.         He accessed the Nedcor Terminal Emulator (NTE)[8], only to do the limits as per the Nedbank rules and procedures to verify and service Nedbank clients.

 

16.           These replies are to be viewed against the respondent’s submission that a further independent investigation was not required having regard to the common cause and/or uncontroverted facts being:

 

16.1.         The applicant’s version to the Nedbank investigator on 21 May 201 that he could not authenticate the imposter as his fingerprints were not working demonstrated that the applicant knew that he was required to perform a biometric verification;

 

16.2.         The applicant made no attempt to contact the home branch of Mr KJM, being Rosebank, after he was unable (on his version) to verify the client;

 

16.3.         The applicant’s colleague, Ms M, reported to Nedbank that the applicant had assisted the imposter previously on 9 April 2021. The applicant did not dispute or engage with Ms M’s version and her version stands uncontested;

 

16.4.         According to the applicant, neither the system used to service and verify clients (Eclipse), nor the secondary system being the banking platform (BP) had alerts or notifications that Mr KJM was deceased. However, it was common cause that the applicant had also accessed the NTE[9] which demonstrated the red flag that Mr KJM was deceased. If, for purposes of verification of limits, the applicant had regard to the NTE system he could not have missed the fact that Mr KJM was recorded as deceased. He had nonetheless failed to authenticate the imposter.

 

17.           The Tribunal has the power to conduct a complete re-hearing, reconsideration and fresh determination of the entire matter that served before the respondent with or without new evidence or information.[10] The applicant had the opportunity to fully address the merits of the complaint against him before this Tribunal. His responses were either dilatory or amounted to bare denials or were evidently incredible.

 

18.           The Tribunal finds that on the undisputed facts, the applicant had:

 

18.1.         met the imposter before on 9 April 2021 and never sought to explain this prior meeting;

 

18.2.         failed to follow the Nedbank processes for verification of a client’s identity which he was aware of. It is not dispute that he had not performed a biometric verification of the imposter’s identity;

 

18.3.         failed to contact Mr KJM’s home branch in Rosebank after having been unable, on his version, to perform a biometric verification of the imposter;

 

18.4.         failed to heed and/or act on the red flag on the NTE which he admits he accessed. On the available documentation, the NTE flag marking Mr KJM as deceased is obvious;

 

18.5.         facilitated access by the imposter to Mr KJM’s account and thereby assisted the imposter to extract R500 000, 00 from Mr KJM’s account.

 

19.           This is serious dishonest conduct, which demonstrates a lack of the honesty and integrity required of a financial services provider.

 

20.           The respondent submitted that the the applicant adopted the approach of accusing the accuser. This approach has been previously disapproved by the Tribunal’s predecessor in the matter of Sarel van der Walt v The Registrar of Financial Services Providers, June 2015, in which the Appeal Board described the approach at paragraph 17 as:

 

“It is… another instance of the common occurrence for persons accused of a wrongdoing, instead of confronting the allegation, to accuse the accuser and seek to break down the institution involved. (Law Society of the Northern Provinces v Mogami and Others 2010 (1) SA 186 (SCA); [2010] 1 All SA 315 (SCA) at paragraph [26])”

 

21.           Reliance on defences which do not address the merits of the complaint do not assist the applicant.

 

22.           Given the common cause and/or indisputable facts as read with the applicant’s replies, the Tribunal finds that there was no need for the respondent to conduct a further investigation. The applicant had not put up a credible defence to the charges put to him by the respondent.

 

23.           The Tribunal finds no grounds to interfere with the decision of the respondent to debar the applicant.

 

24.           The applicant did not seek a reconsideration of the sanction against him. His approach to the serious charges against him demonstrate no appreciation or remorse for the seriousness of his conduct.

 

25.           The Tribunal also finds that there is no reason to interfere with the sanction imposed on the applicant.

 

26.           In the result, the following order is made:

 

26.1.         The application for reconsideration is dismissed.

 

Signed on behalf of the Tribunal on 18 July 2024.

 

G Goedhart SC

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