The Financial Services Tribunal (FST) has rejected a former bank employee’s submission that First National Bank (FNB) acted unfairly and inconsistently when it debarred her because she had only acted according to what was standard practice at the branch where she worked.
FNB summarily dismissed the employee, “MM”, in November 2021 after a disciplinary inquiry found her guilty of falsifying documents by using blank municipal letters to complete the address details of three customers in December 2020 and May 2021.
She was debarred in November 2022 for breaching paragraphs (e) and (f) of section 9(1) of the Fit and Proper Requirements. In terms of these provisions, a person is prime facie deemed to be no longer honest, have integrity, and be of good standing – as required by section 8(1) – if he or she:
- has been removed from an office of trust for theft, fraud, forgery, uttering a forged document, misrepresentation, dishonesty, breach of fiduciary duty or business conduct; or
- has breached a fiduciary duty.
Among other things, the letter of debarment stated that MM’s actions were dishonest because she manipulated the verification process to make a sale and unduly earn commission.
Grounds for reconsideration
“Prevailing practice” was one of the grounds on which MM applied for her debarment to be reconsidered.
She submitted that reps at FNB’s Diepsloot branch were “instructed” to use blank letters provided by the Greater Diepsloot Municipality to confirm or serve as proof of address for customers and prospective customers. Completing the letters had been the practice since 2015 when she joined the branch. All the branch managers at Diepsloot were aware of this procedure, she said. Therefore, she was not aware that completing the letters was in breach of section 21 of the Financial Intelligence Centre Act (Fica).
She said that, at her disciplinary hearing, a member of the Greater Diepsloot Municipality testified that FNB had been using the blank letters for many years without approaching the municipality to verify the addresses of prospective clients.
MM obtained the address details of a potential client while the person was in her presence, counsel for the applicant told the Tribunal.
MM submitted that FNB had failed to consider the provisions of section 9(3) when it concluded that she was not “fit and proper”. She said the bank was required to take the following provisions into account:
(a) Seriousness of a person’s conduct whether by commission or omission, or behaviour and surrounding circumstances to that conduct or behaviour could have a negative impact on a person’s compliance with section 8(1);
(b) The relevance of such conduct or behaviour that has or could potentially have a negative impact on the person’s compliance with section 8(1), to the duties that are or are to be performed and the responsibilities that are to be assumed by that person; and
(c) The passage of time since the occurrence of the conduct or behaviour that had a negative impact on the person’s compliance with section 8(1).
“Section 9(3) is aligned with the proposition that rules must be applied consistently and that decisions to debar must align with facts on the ground. Thus, the applicant asserts that the respondent failed to consider the surrounding circumstances which caused the applicant to act as she did,” the FST wrote in its decision.
MM also said that FNB had not disciplined other reps for using the blank municipal letters. A consistent approach was required to uphold the principles of fairness and lawfulness.
Her counsel cited Matshoba v Fry Metals (1983), where the Industrial Court held that in instances where the employer has not previously acted against employees on a particular offence, their dismissal was unfair. This is because an inconsistent application of the rule causes doubts about the status of the rule.
But the Tribunal said the reliance on Matshoba did not advance the applicant’s case. It referred to FNB’s notice of debarment, which addressed the allegation of inconsistency.
“When the respondent became aware of other staff members implicated in the same or similar incidents, it investigated such allegations, and the implicated staff members were disciplined and dismissed from employment with the respondent,” the FST said.
FNB’s submissions
The Tribunal noted that, in its submission, FNB shifted its position from what it had articulated during MM’s disciplinary hearing. There, it said MM had committed fraud or forged the blank municipal letters. Counsel for FNB conceded that MM completed the blank letters but failed to verify the information or the customers’ addresses.
In so doing, FNB submitted, MM breached both the bank’s Know Your Client (KYC) policy and what was required of the bank in terms of section 21 of Fica.
MM misrepresented the KYC status of FNB’s clients and breached her fiduciary duties by filling in, amending, or completing the proof of residence letters with absolutely no attempt to verify whether the information written down was correct, the bank said.
It said MM had received training on the KYC policy and the Fica requirements. She ought to have appreciated there was no point “asking a client for Fica if she was going to write the address down for them”.
FNB said MM’s conduct posed considerable financial and reputational risk, including that the bank stood to lose millions of rands by way of fines for failing to comply with Fica.
‘No evidence’ of an instruction
The Tribunal’s decision traversed the provisions in the FAIS Act that govern an FSP’s supervisory responsibilities (section 13) and debarment (section 14).
It also considered FNB’s Customer Due Diligence Standard relating to address verification, documents, and records. These provisions were mandatory for its representatives.
Under the Articles of Agreement between FNB and MM, she undertook to comply with all the bank’s rules, regulations, and procedures. She also agreed to conduct herself in a manner that would not injure or adversely affect the bank’s reputation.
The Tribunal said the evidence showed that MM’s conduct amounted to misrepresentation, dishonesty, and breach of fiduciary duty. MM lacked the willingness to comply with the mandatory statutory, regulatory, and professional requirements and standards applicable to her as FNB’s agent.
MM, throughout the processes leading up to her debarment, had not produced any evidence to support her assertion that FNB issued an instruction to use the blank municipal letters. “We consider this in light of the trite principle that it is incumbent upon a person against whom such finding[s] and conclusions are made to demonstrate, concretely, that they are not justified,” the FST said.
Even if it were accepted that the use of the municipal letters was discussed at meetings held by the branch managers with MM, that alone did not prove that an “instruction” was issued as alleged.
The Tribunal said it agreed with the finding of the FST in Michelle Hollenbach v the Financial Sector Conduct Authority where Judge Louis Harms stated that the grounds provided for in section 9(3) are interrelated, and it is irrational to discuss or consider them individually. “The applicant appears to have considered these grounds fragmentary,” it said.
The FST found that MM’s integrity and trustworthiness had been “tainted”. Therefore, there were no valid reasons for overturning her debarment.
