Banks that do not comply with Financial Intelligence Centre directives face serious penalties. Bankers who fail to carefully monitor large flows of money through client accounts face imprisonment of up to 15 years or a fine of as much as R10m — depending on the charge. But keeping tabs on the movement of money is not a simple exercise — as testimony at the trial of Jacob Zuma’s financial adviser, Schabir Shaik, revealed.

Former deputy president Zuma will appear in the Durban High Court tomorrow on corruption charges. The most complex of Zuma’s transactions involved a R2m cheque drawn by Nedbank in favour of former president Nelson Mandela. Forensic auditor Johan van der Walt testified that Mandela had endorsed the cheque in favour of Zuma, who asked Absa’s trust & wills services division to deposit it in his personal account.

On the face of it, this was a no-no because the cheque was a non-negotiable instrument, which meant it should have been deposited only in Mandela’s own account. But, in view of the “high political profiles of the donor and the recipient”, Absa allowed the transaction.

Zuma then wrote a cheque for R1m in favour of the education trust, leaving R1m in his own account. He had drawn down R100000 when, unknown to Zuma, Shaik, who was checking the account on his Absa Cash Focus system, found the remaining R900000 and withdrew it. He placed it in a fixed deposit in the name of Floryn Investments to attract a higher rate of interest, and the funds worked their way through several accounts in the Shaik stable.

This was one of many tangled transactions. The forensic trail through five bank accounts turned up a proliferation of bounced cheques, failed debit orders, mounting overdrafts, lapsed mortgage repayments and unpaid vehicle finance.

From July 1996 to December 2003, Zuma spent R4,3m, mostly on “personal expenses”. But only R3,8m was deposited in his account, R2,7m of it his salary. Van der Walt said Zuma’s bankers had failed to honour 140 debit orders and cheques worth about R447000.

Initially, the shortfall was funded by rising overdraft facilities, but eventually Shaik, or other unknown parties, came to Zuma’s rescue. Van der Walt testified that if Zuma had to repay loans from Shaik and other debts with interest his salary would not cover even the interest.

Van der Walt’s evidence revealed that:

• At one stage Zuma had missed 20 bond repayments on a loan granted by Permanent Bank for a flat in Durban, but in July 2000 third parties paid the bond.
• Standard Bank granted Zuma a R400000 loan in May 1995 to buy a house in Killarney, Johannesburg. This account, with his current account, was soon in trouble. In February 1997, Shaik paid an outstanding R30000 on the bond and R40000 off Zuma’s overdraft. However, a few months later the bank demanded R120000 from Zuma, cancelled his credit card, refused to clear his cheques and eventually took judgment against him. At the trial, Van der Walt said Zuma still owed Standard Bank R386637.
• WesBank financed two failed transactions. One was the purchase of a R305000 Mercedes-Benz E320 in June 1997. When Zuma fell R33000 into arrears, some of it was paid off on his behalf. In March 2000, Zuma sold the car to one of Shaik’s companies. Van der Walt said R71777 was owing. In May 2001, WesBank financed a Mitsubishi Pajero bought by Zuma. By December 16 2003, Zuma still owed R355543 on the car, of which R129000 was in arrears.
• In August 1999, Absa told Shaik that Zuma’s cheque account was R16000 overdrawn and his credit-card account was over the limit. By July 2000, Zuma’s overdraft had increased to R105786.
• In June 2001, Nedbank informed Shaik that Zuma’s account was in overdraft by about R109000, and that it had returned debit orders to Mercedes-Benz Finance and American E.

Van der Walt’s list exposes Zuma as a thoroughly unsatisfactory client. But worse, from a bank’s perspective, is the danger he posed as a politically exposed person. This description applies to anyone who occupies a position of trust in government or other official structures. Legislation against money laundering requires banks to identify and monitor the accounts of such people, their families and their associates.

The good old days, when secrecy was one of the services offered by banks, have gone forever. They are under great pressure to mind their clients’ business.

Hazelhurst is a freelance journalist and co-author of Banking on Change.

With acknowledgements to Ethel Hazelhurst and the Business Day.