FICA Amendment Bill referral: briefings; Financial Sector Regulation Bill: omission; with Deputy Minister

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Finance Standing Committee

07 December 2016
Chairperson: Mr Y Carrim (ANC)
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Meeting Summary

Discussion on Adoption of Financial Sector Regulation Bill
The Committee discussed the reasons for the omission of three clauses of the Financial Sector Regulation Bill when it was voted on in the National Assembly on 6 December 2016 and the way forward. The Chairperson indicated that this had been a human error, which had been anticipated by the Committee in its trial use of electronic tracking in the drafting process. In anticipation of such glitches in the drafting process and to allow fresh minds to consider the Bill, the Committee had decided to report to the National Assembly that the Bill ought to be considered by the Select Committee on Finance as if it were a section 76 Bill. National Treasury indicated that the errors were inadvertent and pertained to three clauses which it indicated in a one-page document.

The Democratic Alliance questioned why the Chairperson, having knowledge of the errors, did not elect to postpone the voting and stated that the errors were due to rushing the Bill through the final stage. To which the Chairperson responded that he had been unable to secure the consent of the Programme Committee to ensure a later debate on the Bill and that the errors were anticipated, resulting in the proposed NCOP process. Further concerns of Members included problems with printing of sufficient number of Bills and the timely delivery to Members. The Chairperson stated he would continue to pursue the continued use of the electronic tracking system in the legislative process.

President’s Referral of the Financial Intelligence Centre Bill
The Committee received briefings from Parliamentary Legal Services, the Financial Intelligence Centre and National Treasury on the 28 November referral back to Parliament of the Bill by the President under section 79 of the Constitution. The Bill was passed by Parliament on 25 May 2016. The first two presentations covered similar ground including the legal nature of the act of referral under section 79 and process to be followed; the reasons for the President’s reservations about the unconstitutionality of clause 32; and a brief narrative of the judicial and legislative precedent around warrantless searches. The briefing by National Treasury covered broader policy aspects such as the reason for adhering to international standards such as those set by the Financial Action Task Force (FATF) and the time pressures on the Amendment Bill.

The Committee decided this meeting would mainly deal with how it was going to process the Bill going forward, given that Parliament was to rise on 9 December. The Committee had received two submissions from the public on the Bill and had to determine how it was going to process these and whether it would accept further written or oral submissions. Parliamentary Legal Services indicated that the processing of the Bill was determined under the Joint Rules of Parliament and these were silent on the point, meaning the Committee was to determine this for itself. The Committee decided that consistent with its past stance it would accept public submissions. However, as the mandate of the Committee was limited to a consideration of the President’s grounds of reservation the submissions should be similarly limited.

The Chairperson reported to the Committee that he had initiated the process of obtaining a senior counsel opinion. Members agreed that this ought to be done and that this was subject to the administrative processes of Parliament.

Members also discussed the merits of the referral back to Parliament and raised matters such as the overall merits of warrantless searches in South African law generally. Further, they requested information on how many inspections the Financial Intelligence Centre had conducted and whether there were frustrations in the process of obtaining a warrant to search. The Centre responded that 930 inspections had been conducted as at 30 March 2016, that they had all been by consent of the inspected party, except for the Auction Alliance case which led to the constitutional challenge which ordered the amendments.

Meeting report

The Chairperson noted the presence of Mr Mcebisi Jonas, Deputy Minister of Finance. He referred Members to the draft Committee programme for the first term of 2017, and asked if there was anything Members wished to add to the programme.

Mr D Maynier (ANC) said that he knew the South African Revenue Service (SARS) was on the programme and urged that, given what was happening with SARS, that this should be as early as possible.

The Chairperson said SARS comes to the Committee anyway, with National Treasury during the budget. He had not written to the SARS Commissioner, but would do so that day. The Committee has agreed on the issues, but he saw Mr Maynier had posed similar questions in the House, to which he had received responses to at least one. He asked for that response to be forwarded to the Committee. SARS should be put on the agenda, to be discussed at the first meeting. However, given the Financial Intelligence Centre Amendment Bill, the Independent Regulatory Board of Auditors hearings to be held in January and the budget process, the Committee will try to do it before the State of the Nation (SONA) debate or immediately after the Budget Speech process. This could be changed, but in principle there is no problem. The ANC has been asking similar questions to the ones Mr Maynier asked in the House. Therefore, the programme was fine for present and it could be adjusted at the first meeting of the following year, but that would be on the FICA Bill. What the content of that meeting will be, will be determined during the present meeting.

He agreed, on the request of the DA, that the outstanding clauses of the Financial Sector Regulation Bill be put on the meeting agenda for the day.

Financial Sector Regulation Bill: omission of three clauses during voting
The Chairperson said Members have received a one pager on the corrections to the FSRB. This was discussed two weeks before and it was decided that if this is to be voted on, Members must bear in mind that it runs into 200 plus pages with a large number of schedules which Mr S Buthelezi (ANC) managed for the Committee, which were adopted the previous week. What was to happen was that if any amendments were made which had implications for the schedules then there would be consequential amendments. This was the first time and only Committee which used electronic tracking, which Members felt was the best way to do this. He raised this because the EFF and UDM were present and had not been privy to this information.

Three clauses had been omitted in the B version of the Bill voted on. The Committee had decided that the Committee Report would indicate that fresh minds are needed and although this is a section 75 Bill, the Select Committee on Finance ought to look at it as if it were a section 76 Bill. Even, if the Select Committee made no changes, then the Standing Committee would look at the Bill again. That was the approach of the Committee and because Members agreed to vote on the last possible day they could, which was the previous day, he had alerted the Committee that it would be possible that due to the use of the tracking system instead of having an A version of the Bill and a B version of the Bill, they would just be put into one document and then the tracking would be deleted. At the last minute there were some negotiations between the National Credit Regulator (NCR), Department of Trade and Industry and Treasury. Even then he alerted the Committee to the fact that it is possible that cross referencing may get distorted and wording errors creep in when the tracked Bill was printed. If it was discovered before the debate, this could be taken to the House as long as it could be shown that this was what the Committee had amended. All parties had agreed to do that, even if a party disagrees with a particular clause which was lost.

It was late on 2 December 2016 Mr Ismail Momoniat, Deputy Director General: Tax and Financial Sector Policy National Treasury, had contacted him to indicate that there was a problem and that they were thinking of introducing it into the House. However, that would require a Committee meeting and writing to the Speaker of the National Assembly. Further, the Bill was in Parliament’s hands, therefore he would take the responsibility and report to the Committee. He had met with Treasury at 13:30 the previous day and to be fair when he heard them, it really was a human error. The last amendments which were made, two of them and one consequential amendment got lost. The amendments deal with the NCR and he suggested to Mr Momoniat that this could be argued as a deliberate error. The Chairperson was unconvinced by this idea, because in this situation everyone had tried to accept responsibility. As he understood the Rules and conventions in Parliament it is the responsibility of the Committee Secretary to ensure that every amendment is printed. However, one had only joined the Committee two months ago and the current secretary was overburdened. It was Adv Frank Jenkins, Senior Parliamentary Legal Adviser, on behalf of Parliamentary Legal Services and Ms Jeannine Bednar-Giyose, Director: Financial Sector Regulation and Legislation National Treasury, who had dropped the ball. The National Treasury team was taking responsibility for what was essentially a parliamentary human error and Parliament was accepting responsibility. Ultimately the Chairperson was responsible. He was pleading for understanding, given that what the Committee had opted to do the previous week was to hand things over to the National Council of Provinces (NCOP) indicating the errors and asking them to adopt in the first instance, then decide whether they agree with the merits of the few items which were lost. He had spoken to Siphamandla Kumkani: Director Credit Law and Policy Department of Trade and Industry, who did not feel it was a conspiracy, and Lesiba Mashapa: Company Secretary National Credit Regulator who had also understood. He was proposing looking at the thing, getting an explanation and then, consistent with the previous week’s decisions, to write to the Chairperson of the Select Committee indicating the error and asking that the Select Committee adopt those as NCOP amendments, after deciding on the merits or demerits. There are things which the NCOP could pick up in the Bill which the Committee would have to attend to in any case. He asked to hear Treasury briefly.

Mr Ismail Momoniat, Deputy Director General: Tax and Financial Sector Policy National Treasury, corrected that he had notified the Chairperson on 5 December 2016. Treasury had a one pager which outlined the errors picked up on 5 December. Treasury wanted to make public that the errors were made inadvertently and Treasury should have read it, but he was convinced that there would be other small errors picked up with the NCOP. One error was the omission of the word ‘only’. The second one was the two paragraphs being replaced and the third was in relation to a consequential amendment where a few words were missing. This was put in red on the handout. These were adopted by the Committee in principle, but when the formal voting was done by the Committee, they were omitted. The version voted on in the House was the version which the Committee had formally passed. Treasury acknowledged the error and apologised.

The Chairperson said the tracking system should be used fully and what the Committee should have done was to put the end document into the tracked version in a different colour, so the problem would not have occurred. This was also a learning experience and his expectation is that this is to become the norm. So if Treasury introduces a provision independently based on exchanges it has had under the Committee’s instruction, then it should be underlined or in a different colour. The lesson learnt was that these amendments have to be put into a different colour. He would write a proposal during the constituency period, to be taken to the House Chairperson, because this tracking should be happening.

Mr Maynier said he accepted the explanation from Treasury that an error was made. Treasury states that they do not know how it happened, but he did. It happened because the Committee rushed the Bill in the last phase and the lesson learnt here is that the Committee should not be rushing the Bills in the final phase. That is not the real issue, the real issue is timing. When did the Committee become aware of the problem? His understanding was that Members became aware of the error after the debate had taken place in the National Assembly. It now emerges that at least Treasury, the Chairperson and perhaps others at Parliament were aware of the error on Monday night, prior to the debate. The remedy then should have been different: the debate should have been postponed to later in the day or the present day, so that the National Assembly could have voted on the correct version of the Bill. What had now happened was that this Committee had voted on one version of the Bill and the National Assembly had voted on another version. Given the fact that Members knew there was an error in the Bill, they should have simply re-printed the Bill, distributed it to Members and postponed the debate. He took issue with the fact that the Chairperson, possibly other officials at Parliament and Treasury knew in advance that the error existed and caused the National Assembly to vote on the wrong version of the Bill. That was totally unacceptable.

The Chairperson clarified that the Bill which was voted on was the Bill which the Committee passed. As the tracking system was used, the Committee did agree that glitches could occur. The Bill voted on in the House was the Bill which the Committee voted on the previous Wednesday, 30 November. That Bill voted on the previous Wednesday left out these three things. Therefore, it was not correct to say that the Bill voted on by the Committee and by the National Assembly were different. What could be said was that the Bill voted on Wednesday did not contain the amendments. It was the same Bill and before anyone misunderstood, he had no reason to be dishonest. He had indicated to Mr Maynier that he had learnt of the error late on 5 December 2016 and had indicated the position.

Mr A Lees (DA) said when the Bill was dealt with by the Committee, the error had already been made. That was discovered on Monday and Members in the House voted on it despite knowing there was an error. He was unsure about other Members of the Committee, but he was yet to get a copy of this Bill. He was told by Mr Maynier that he received one in his pigeon hole about 20 minutes before the previous day’s sitting. He did not know how that happened and his understanding was that every Member was to receive a copy, not just Members of the Committee. Even as he spoke, he still had not received one.

The Chairperson said everything was confirmed at about 15:00 on 5 December 2016, including emails from Adv Jenkins and Mr Neil Bell.

Mr Maynier said the DA had a debate prior to the sitting about delaying the vote and stopping the Bill on the basis of Members having not received copies of the Bill. He checked clause 137, but he had not had time to check the balance.

The Chairperson asked who distributes the Bills once they are printed. He did not know the process, these were administration challenges in the last week of Parliament and there was no conspiracy.

Adv Frank Jenkins, Senior Parliamentary Legal Advisor, said once the Bill is finalised, all the proofs are done, it is printed and brought to Parliament. 450 copies are delivered and distributed. There was a problem with the printer on 4 December 2016 and 400 copies were printed, which were delivered and distributed on 5 December 2016. He was not sure who puts the copies in the Members’ pigeon holes.

Mr Lees said the issue is not so much about him getting a copy, but rather the failure in the system that a Member was left without a copy.

The Chairperson asked for more responses from Members, but reiterated that there was no conspiracy, it was the last week of Parliament and it was human error. It was absurd that everyone was trying to accept responsibility, but in fact the Chairperson was taking responsibility. He apologised and took responsibility.

Mr N Kwankwa (UDM) said he understood that mistakes do happen, but had the Chairperson considered the possibility of delaying the debate after having spoken to Mr Maynier.

The Chairperson said the previous week the Committee had agreed that this would be taken to the NCOP. All that has happened is that the problems which surfaced actually dealt with policy issues. That this would happen was reasonable given the circumstances. The Bill was voted on 30 November 2016, it was to be printed by 5 November 2016. This was in the last week of Parliament, when there are a lot of reports and ATCs to finish. His own view would be that even if there had been more time, with a Bill of this length, this would not have necessarily been avoided. On the matter of fast tracking the Bill, that had nothing to do with this error. The Bill had been exhausted, as Mr Maynier had himself indicated. Personally, he did not believe that even if the Committee had decided to not vote on the Bill, that this would not have occurred. He had ruled out that for those reasons. He had learnt of the error on late 3 December, meaning a meeting would have to have been called on Tuesday morning – a meeting had to be convened which would not have been possible. He had pushed for the House to finish on Thursday 8 December 2016, because it was expected that the Insurance Bill was to be introduced. He had even suggested that the debate be today, but the House Chairpersons and the Programming Committee decided that Members could not sit to consider one Bill. He then suggested that the FSRB be discussed at the present day’s sitting of the House, the Programming Committee came back and said no, once the Deputy President speaks they want farewell speeches. They did not want to discuss the FSRB, because Members would oppose it and then that would not set the right mood to have farewell speeches. He tried to negotiate with Mr Maynier and now he is raising all sorts of questions, forgetting that the previous week it was agreed that this ought to be taken to the NCOP. He asked for responses on what should be done.

Mr S Buthelezi (ANC) said now that Members know what has happened, they accepted the apologies and for him now the main thing was how to take the matter forward.

Ms P Kekana (ANC) said given the amount of work the Committee has done and all the activities which Members and Treasury have been involved in, mistakes like this will happen. She did not think the Chairperson should take the blame, because Treasury was the most at fault. Members accept this, but are also saying to Mr Momoniat that Treasury should be meticulous. These are small oversights which may create unnecessary problems going forward. All this work has been done very well and at the last minute this happens. It was unforeseen, but as far as possible mistakes of this nature should be avoided. From the side of Parliament, Adv Jenkins must also help, because the unit which deals with ensuring the Bills are received by Members must be monitored. This should not only be done for the Committee; it must be done for all activities of Committees where Bills need to be available for Members. That should happen so people do not simply arrive to debate without even having a copy. She had also thought that last week the Committee said that in areas where things are found that still to be done, from its side if there was no opportunity, then the NCOP should be alerted to enable them to deal with those matters. She would propose making the NCOP aware of the three omissions.

Mr Maynier said his question remains that when the defect was brought to the Chairperson’s attention on 03 December 2016, why the obvious option was not chosen which would be to reprint the correct version of the Bill and pass that in the National Assembly.

Mr Lees said the Chairperson had made a point about people taking responsibility and he would like to thank Treasury for highlighting the mistakes, because if Treasury had not been what it is and did not want to be embarrassed, it could have simply kept quiet. To castigate people when the error has been highlighted and it can be fixed is a good thing. He thanked the Chairperson for raising the issue and it should be dealt with.

The Chairperson said he would summarise, but also present his own view. Firstly, that the Committee should continue using the tracking system, but without an end document and rather to have the insertions made by National Treasury in a different colour. That makes it clear that these have not been approved by the Committee. Secondly, he was going to write to the authorities arguing for the use of the tracking system. Thirdly, he wanted to remind Members that a decision was taken to send the matter to the NCOP and he had had three exchanges with the Chairperson of the Select Committee on Finance explaining this. Given the gravity, length and number of hours spent on this Bill, this was not a train smash. It does point to the need to upgrade capacity, Adv Jenkins is highly stressed and the legal unit needed to be upgraded. It was DTI which brought the error to the attention of Treasury. He had spoken to Mr Mashapa who was satisfied and spoke to Chairperson of the Select Committee on Finance, Mr C De Beer, who was also satisfied. The process would be what was agreed to the previous week. The Bill which the Committee voted on the past Wednesday 30 November,, was the Bill voted on in the National Assembly. He was also unable to turn around the Programming Committee on his own. He did think where Mr Maynier may have a point is that with Bills which are beyond a certain number of pages, Parliament should set up an internal administrative process that requires a gap of seven days. In January he would put forward proposals and report back to the Committee. It does not affect the Bill and the three omissions are covered elsewhere in the Bill. It is not like it is a major policy train smash. Finally, all who are responsible apologise, have learnt a lesson here and it would not happen again. He asked why when everyone had confirmed the Bills were printed, they were not distributed.

Adv Jenkins added his apologies and on the tracking mechanism, said Parliamentary Legal Services has a drafting unit looking at an electronic system to do electronic drafting while Committees consider Bills. So when the Committee is done with deliberations the Bill is complete; one copy only which would then be distributed. It is a specific system for drafting legislation, which is in its infant stages and any kind of political pressure to get that going would be helpful in getting this into the budget.

The Chairperson said this was 10 years later than it should have been. He then asked to move to the last item on the agenda.

Mr Kwankwa said he needed to emphasise that this was very important for the smaller parties, because it meant shifting the cost centre from Parliament to political parties. It was fine with things such as order papers and question papers, but thick documents would then have to be printed by parties at a huge cost for printing. He has raised this in the Chief Whips’ Forum; and this included documents which are received by email from Portfolio Committees. If the intention is to improve the quality of contributions by Members, then Parliament had to provide the necessary support.

The Chairperson said when he raises all these issues in the following year with House Chairperson, Mr Cedric Frolick, the Committee Section Manager and the rest of management he would take Mr Kwankwa’s contribution into account.

Referral back to Parliament: Financial Intelligence Centre Amendment Bill [B32B-2015]
The Chairperson said the Committee was asking Adv Jenkins on behalf of Parliamentary Legal Services to tell Members what the process was when the President referred a Bill back to Parliament due to unconstitutionality. Secondly, in considering the process the Committee has received two submissions. One of which speaks to more than the unconstitutionality issue, claiming “glaring failures in the policy”. Adv Jenkins would guide the Committee on the parameters along which the Committee can consider submissions. There was also a submission by CASAC, which offers proposals on the way forward. He had no doubt there will be other people who want to make submissions and the Committee will have to decide how to manage that process. Adv Jenkins will then give an interpretation of the opinion by the President’s lawyers. Then the Committee will hear from Treasury and the Financial Intelligence Centre (FIC) on their initial response. The Committee will then have to set out a broad programme or process for what is to be done when Members return in 2017. Members were not going to go now into strong arguments about legal issues on either side. The Committee needed to clarify parameters within which it was to work and if Members wished to add other issues that could be considered.

Parliamentary Legal Services briefing
Adv Frank Jenkins, Senior Parliamentary Legal Adviser, said the purpose of this presentation was to give some food for thought, as the Chairperson had indicated and he had tried to put as much information as much possible for Members to take back in written form. Section 79 of the Constitution provides for where the President has a reservation about the constitutionality of a Bill and refers it back to the National Assembly. Only in certain instances will it also go through the NCOP, as well as the National Assembly. Section 79(2) states that the Joint Rules of Parliament are to provide for the procedure for reconsideration and there are various options which the Committee can exercise when it reports. The Joint Rules follow the principle set out by the Constitutional Court to limit the mandate of the Committee’s consideration to the President’s reservations; the House has passed everything else. The mandate is only deal with the reservations of the President and to then report on its view. It can agree and report an amended Bill; recommend scrapping the Bill due to fatal unconstitutionality; or disagree and refer the Bill back to the President. The Joint Rules distinguish between procedural defects and substantive defects. A procedural defect will automatically go to the NCOP, such as where there was a lack of public participation or absence of quorum. Here there was no lack of public participation, so there is no mandate to redo that process. Be that as it may, the Committee can accept and request submissions. However, these must fit squarely between the four corners of the President’s reservations.

Adv Jenkins said this is not the first time a Bill has been referred back, this year there have been two and about 11 Bills in total. Parliamentary Legal Services tracks the referrals, reasons therefore and how they were dealt with. The background to this referral was that the President wrote to the Speaker on 28 November 2016 stating that he was referring the Bill under section 79(1). The crux of the President’s concern was clause 32(b) of the Amendment Bill which inserted section 45B(1C) that deals with warrantless searches. The President was of the view that it limits section 13 of the Constitution, the Right to Privacy and therefore, it must comply with the Limitations clause of section 36. The President is not convinced that the standard set by section 36 is met. According to the letter from the President, criminal prosecution may follow from such warrantless searches, meaning it was even more important for an independent body like the judiciary to ensure there is a warrant. The second point raised by the President was that there was no limitation on the subject of the search, meaning there was too much discretion given to the officials. The President’s recommendation is that subsection (1C) be circumscribed to limit the subject of the search.

Adv Jenkins said the provision was not amended by the Committee and was as it came from Cabinet and Treasury. The original s45B of the Financial Intelligence Centre Act (FICA) states no requirement for a warrant and that was subject to a constitutional challenge in a Constitutional Court judgement. The reasons for referral by the President as noted above are the four corners of what must be looked into by the Committee. The President admits that one may read in certain reservations on the ability to inspect remedying the unconstitutionality, but requires that this be more explicit. The reservation rests on section 36(e) of the Constitution which requires the use of the least restrictive means. So as the search is for a purpose, then the means which is least restrictive of the right to privacy ought to be used.

Subsection (1) of original s45B was important as it provides that warrantless searches exclude all private residences and only apply to FIC supervised premises. From subsection 1A were the insertions brought about by the Bill. Subsection 1A expressly states that an inspector may only enter a private residence for the purpose of determining compliance with the Act or any order made in terms thereof; where a warrant has been obtained under subsection 1B. Subsection 1C was the concern as it allowed an inspector, who is required to obtain a warrant under subsection 1A, to enter any premises where they believe a warrant will be issued under subsection 1B if they applied for it. This is where the problem lies and whether it is clear enough that an inspector may enter only to deal with compliance under the FICA. That would be his interpretation of the President’s concern. Further, there is a new definition of non-compliance which excludes offences except under the FICA. So if an inspector enters premises to conduct an inspection under the proposed section s45B and they come upon a criminal offence there is nothing they can do, aside from refer it to the police. There is no mandate given to the inspector to seize anything which discloses a criminal offence and should it be collected in that way, it would likely be inadmissible as evidence.

Adv Jenkins referred the Committee to the memorandum of the FICA Bill, because what Treasury did was to give effect to what the Constitutional Court found in Estate Agency Affairs Board v Auction Alliance (Pty) Ltd (Auction Alliance). Members can look at what the Constitutional Court did there and whether the Bill is consistent with that. The Court there confirmed the High Court order and wrote in a provision giving effect to how it viewed warrantless searches. The point whether one can have a warrantless search and exactly where the line lies has been left for the legislature. The Court did a reading-in valid for 18 months. The provision which it read-in contemplated warrantless searches and that to him indicated that the question whether there should be warrantless searches had been answered by the Court in the positive. Further, the Court’s provision contemplates the suspicion of criminal offences, which the FICA Bill takes a step back from. There is a big debate around here and there is a question around whether you need less or more control when you are doing an administrative inspection. The consequences may be heavier in a criminal matter, but the purpose for which you do the search may be more important in an administrative matter.

Adv Jenkins said the questions to be asked included whether warrantless searches are permissible. If so, whether they are applicable to criminal prosecution and lastly, whether the discretion in the proposed s45B was too broad.

Financial Intelligence Centre (FIC) briefing
Mr Pieter Smit, FIC Executive Manager: Legal Policy, said to explain the context of why this clause was brought to the Committee, is that it is part of the broader legislative structure to combat money laundering. The reason countries around the world combat it is because of the exploitation of their financial systems for nefarious purposes. On the one hand this empowers criminals financially, but it also undermines our financial stability.

Mr Smit said for a system to effectively deal with money laundering, its end objective should be that adequate information is captured in the financial system and that that information is accessible and can be used when necessary. This requires transparency in the financial system, which starts with the institutions having to comply with customer due diligence. Once institutions know who they are dealing with, then that information is then accessible for investigators. A key component of this is ensuring institutions are properly supervised, to ensure they play by the rules. Institutions would not necessarily abide by their own volition and this needs to be overseen by a regulatory institution. It is in that context that we are dealing with the authority of inspectors to search.

Mr Smit said when these types of things are implemented the aim is to do so within international standards, which here is in the Financial Action Task Force (FATF) recommendation 27. The methodology of how FATF assesses this recommendation sees a specific reference that inspector’s powers should include the power to inspect institutions and compel the production of information. This power should not be dependent on an order of court. That is the starting point from which the FATF approaches this. This standard was presently used and a number of countries had been assessed against it. Examples assessed to have met the standard include Canada, Malaysia and Norway, where the mechanisms were accepted as well as adapted to the purpose. Australia was criticised as the inspection powers equivalent to those under s45B, are legally made dependant on the consent of the occupant or a warrant having to be obtained. That was found by the FATF to undermine the effectiveness of a supervisor’s ability to supervise institutions and the FATF downgraded their assessment of it on that basis.

Mr Smit turned to the process which brought them to this point in the amendments. The Auction Alliance matter was the origin of the amendments. The essence of the finding in that case was that s45B took the approach that a warrant is never required to inspect and the Constitutional Court said that can never be acceptable in our constitutional democracy. There must be differentiation between instances where a warrant would not be required and where it would be required. This distinction must be clearly defined in law and the amendments brought this into effect. The amendments create a category of inspection by right; being institutions which have already been subjected to the FIC’s supervisory authority. The category for which a warrant is required is those which have not subjected themselves, unlicensed or unregistered entities, and institutions which operate from private residences. Many Constitutional Court judgements have held that the private home is the inner sanctum of the right to privacy and therefore there is restricted access for even a regulatory authority, as per section 45B(1A). Section 45B sets out the grounds on which such a warrant may be issued and section 45(1C) creates certain instances where an inspector would normally be required to obtain a warrant, but may proceed without first obtaining one. How it would work in practice is that a regulatory authority such as the Banking Supervision department of the South African Reserve Bank would be entitled to inspect licenced banks without warrants. If it were to inspect a pyramid scheme then they would require a warrant, because it is an entity which sits outside the scope of their authority. If the supervisor needs to urgently carry out an inspection or consent is granted, then it may proceed without obtaining a warrant.

Mr Smit on the concerns in the referral letter, said the FIC is not far from Parliamentary Legal Services. It is important to note that section 45(1C) does not permit warrantless in general, it is a deviation from the general rule that a warrant is required. It creates an exception for particular circumstances where it would make it expedient or a waiver of the right to privacy for the inspection to proceed. So, the basis upon which an inspector could conduct an inspection without a warrant would be the same as where an inspection would have been carried out with a warrant. Looking at the grounds upon which such an exception is provided, there are two. First, consent of the inspected party. Secondly, if the purpose of the inspection would be frustrated if the inspector first has to go for the warrant and there are reasonable grounds to believe that a warrant would be successful.

Mr Smit said those two grounds as exceptions for a warrant requirement are found in legislation in many different instances. So having to determine whether these are in principle acceptable ways to deviate from a warrant requirement, Members have to look at section 36 of the Criminal Procedure Act which contains the same grounds. In that case the infringement on a person’s privacy is more stringent, because the purpose of the inspection is to allow an inspection for criminal evidence which could lead to a person being put in jail. That is different from the purpose of inspections under the FICA. The consent ground under section 36 of the Criminal Procedure Act was considered by the Constitutional Court. Over the lifetime of the inspections framework which officially started in 2011, more than 6000 inspections have been done by the FIC and other institutions. In only one of these instances did an institution refuse consent which was the Auction Alliance case. By and large inspections are done on a voluntary basis. The second ground for exception is also contained in the Criminal Procedure Act and the presentation listed a few examples. The wording does differ, with private residences allowed in certain instances, but the principle of consent and avoiding frustration is contained in all of these.

Mr Smit said at least three Constitutional Court judgements have considered these issues. Gaertner v Commissioner, SARS dealt with customs legislation and there it mentioned section 22 of the Criminal Procedure Act. The Court indicated that this is the type of provisions which a SARS official should use should they wish to inspect. A more recent case is Minister of Police v Kunjana where the court again considered certain seizure powers, under the Drug and Drug Trafficking Act and indicated that should one wish to see a constitutional provision they should look at section 22 of the Criminal Procedure Act. In Auction Alliance the court read in an exception to a warrant requirement and specifically referred to the expediency requirement. Therefore, in principle it is established that it is constitutionally permissible to deviate from a warrant requirement in such circumstances.

Mr Smit, on the matters raised by the President’s referral letter, said the FIC agreed with Adv Jenkins’ explanation that an inspection is done as a function of a supervisor. A supervisor’s statutory functions do not include the investigation of crime and that precludes the use of the information found in the inspection to the inspector’s function: checking compliance. That mandate is specified expressly in section 45 of the FICA and is repeated in section 45B(1A). So there are numerous places where it is made clear that the supervisor cannot go beyond its functions in conducting an inspection. The consequences of an inspection therefore are that the material obtained can only be used in the supervisor’s supervisory function. Meaning it could lead to an administrative penalty, but could not be used as evidence in criminal proceedings, which requires a separate procedure.

Secondly, the concern is for private residences and the fact that the section reads 'any premises'. The subsection needs to be read with the section as a whole. For private residences to be subject there are four factors to be satisfied. The residence must be used for the business of an accountable institution, otherwise it is outside the realm of FICA. The grounds upon which a warrant may be issued apply to private residences under section 45B(1B): reasonable ground that non-compliance exists, entry is necessary to find that evidence and necessary to apply FICA to that non-compliance. Those same grounds would apply where the inspection is done without a warrant, because this is an exception to the general rule. The supervisor would still have to believe they meet these general requirements. Otherwise the exercise of the warrantless inspection would have been beyond the scope the powers which FICA provides for the inspector. So looking at section 45B(1C) one must consider the section as a whole and understand that the grounds provided for inspecting under (1B) apply in the case where an inspector moves under (1C).

The next element raised in the referral letter is that the exception to the warrant requirement can be achieved by other means. The assumption is that the purpose is for an inspector is to launch a surprise attack and that can be achieved by getting a warrant without informing the inspected party. What is missed here was that the deviation from the warrant requirement is not necessarily to launch a surprise attack, but rather to avoid a delay which could frustrate the reason for the inspection. It is a delay issue, rather than a surprise issue. All warrants are applied for ex parte, so there is never prior notice. The inspected party only becomes aware of the warrant once it is served, at which point they can contest the issuing of the warrant, but they are never given forewarning that the warrant is being applied for. So not notifying does not deal with the delay issue and it is not a correct match for the purpose of the section.

The last ground pointed out in the letter is that the breadth of the other provisions in the Bill and particularly the massive amount of information which institutions have to obtain on their customers, requires careful scrutiny of the rest of the Bill. That point is accepted, but it must be understood that the inspection is not about obtaining information about the customer of an institution, rather it is about compliance by institutions with their responsibilities. Investigating a customer would go beyond the scope of the inspection mandate.

Mr Smit said the FIC was in the process of discussing this with counsel and when those opinions have been finalised they would be shared with the Committee.

National Treasury briefing
Mr Momoniat said the two presentations have gone into the detail, what he was going to do was to give a broader context and note the other pressures faced. The reason this was being done was not due to any international institution such as FATF, but because of South Africa’s commitment to fighting corruption and to making it harder for criminals to use bank secrecy and illicit cross-border flows to hide the proceeds. When the FICA Bill was brought, the intention was to update FICA, because things get modernised, update for newer standards related to politically exposed persons, cater for the Constitutional Court judgement and also make it easier on the customer. The current approach is not risk based and if the approach is risk based, then it should bring down the burden on customers. It is important to note that South Africa has decided to meet standards set by bodies like FATF, because it wants to be able to conduct transactions with the rest of the world. The idea about corruption is to take preventative action, so this becomes a legitimate tool to fight corruption through prevention.

Mr Momoniat said there were deadlines to be met with the FICA Bill. The first was that set by the Constitutional Court, which was February 2016 and due to Treasury bringing the Bill late that was not met. The Bill not being enacted has meant that since February, warrantless searches could not be applied by the FIC or other supervisors. The other deadline related to FATF and Treasury would be distributing the last mutual evaluation report. When he had gone to the FATF meeting in July, South Africa had been served all kinds of yellow cards, because the Bill still had not been through Cabinet. Secondly, the FATF chairperson wanted to meet with the Chairperson and Mr De Beer. However, FATF was happy enough that the Bill had been passed and there was a requirement that the report be made by September 2016. FATF was happy enough with the progress made that it extended the deadline to February 2017. FATF urged two further steps: assent by the President and putting in place regulations to allow the functioning of the amended FICA. It required a lot of work to prepare the regulations. Treasury will report in February and will do the best to explain the constitutional provisions. The action which should be prevented is to ensure that FATF does not issue a public statement admonishing South Africa for non-compliance and as a risky environment for anti-money laundering and terrorism finance. It is in our interest as South Africa to comply with these standards, because otherwise people are less likely to provide information. There are lots of people who have left this country and if South Africa does not meet standards, then it will not get the information. South Africa would therefore be unable to deal with problems such as illicit flows, because most money laundering is done by taking proceeds into another country. International transactions will be harder and more expensive, as overseas regulators will not place reliance on our institutions and our institutions would have to get corresponding banking links with overseas banks. This has happened in countries such as Iran and we do not want to get there. The FATF can terminate South Africa’s membership for non-compliance, but that is an extreme step.

Mr Momoniat said Treasury believes we must resolve the constitutional issues arising as soon as possible, to allow the Bill to be signed into law and the regulations put in place. Treasury would argue for a bit more time at FATF, but to have a sense of the time required would be useful. Since the Bill had been passed there had been a lot said in the media, but Treasury has had a preparatory process anticipating implementation around May 2017. Meetings have been had with stakeholders involved with the regulations. Further, letters of objection from the Progressive Professionals Forum and Black Businesses Council were reported in the media; meetings were held with them. They argued that other provisions were unconstitutional, but no legal opinion was put forward. This had been requested and was awaited. On 29 November 2016 Treasury learnt that the President was referring the Bill back and this was through the same letter delivered to the Committee. He noted that Treasury was not in possession of any other documents.

Mr Momoniat on process, said provision had been there since 2014 almost. The provisions were taken from the Auction Alliance case, a legal opinion at that stage was received from the Chief State Law Advisor, and the Bill has been through the executive and several Cabinet committees. It was effectively approved by Cabinet twice, once for public comment and secondly for tabling. So that clause has stayed and in his recollection it did not get changed at all by the Committee. This provision was not raised as a concern during the process leading up to Parliament and in Parliament. This did not mean there was no concern, just to outline the process.

Mr Momoniat said Treasury has been asked why it was listening to outside standards. Firstly, this is in our own sovereign interest and once that determination is made it ought to be pursued. Some have asked why should we stay in the FATF and Treasury indicates that even if South Africa leaves FATF, the standard still applies. It would remain obliged, but lose its place at the negotiating table. South Africa is championing the whole issue that as the standards are implemented by private institutions, many banks are found to be cutting their corresponding banking links with African countries in an effort to shed risk. South Africa has taken this issue up in a big way, but it has been prioritised in FATF and other fora. So it is important not just for South Africa, but for Africa for South Africa to stay in these fora and to argue these matters.

Ms Kekana said the Committee should move from the premise that this piece of legislation should be treated as a priority, because it relates to topical issues such as money laundering, illicit flows and corruption. As the ANC these are matters which it holds critical. She assured Treasury that South Africa should be part of these international bodies, but these bodies must not treat South Africa as though it is developed. Members want also to have clean governance and attract foreign direct investment, if it will assist. She had noted the presentations and appreciated the information which would assist Members. She proposed that the ANC should have a study group and reflect on these matters so that when Members return in 2017, they would have reflected on these matters. Treasury has been in very unfortunate situations and an example is the contestation between SARS and the FIC. People will also want to use some of these things, whether for political or other battles. Therefore, her proposal was that Members should consult among themselves and get legal opinions. Further, when this is to be considered, the regulatory bodies should be present, such as the Financial Services Board, FIC and the Registrar of Banks. Thus everyone is present when dealing with these matters and it can be dealt with holistically.

Mr Maynier said he had two proposals and two questions. First, Adv Jenkins states in his letter that the Committee may request any documents that pertain to the President’s reservations in terms of its general powers under section 56 of the Constitution. He formally proposed that the Committee require that the President be required to discover all documents relevant to his reservations and which were used in determining that the provisions in the Bill were unconstitutional. The Committee’s deliberations would benefit from insight into those documents. Secondly, he proposed that the Committee receive an independent legal opinion on whether the provisions are in fact unconstitutional and for a proposal on how to remedy defects. The reason he said this was because the Chief State Law Advisor signed off on the Bill, Treasury believed it was constitutional and Parliament believed the Bill was constitutional and under such circumstances he would urge for an independent opinion.

The Chairperson said the Committee was in the process of requesting senior counsel opinion. He had informed Mr Maynier of this and the problem was that with Parliament, three options were required. It is nothing outlandish to require senior counsel.

Mr Maynier said then it was agreed and his second proposal needed to be decided upon.

The Chairperson said the senior counsel process had been started and there was no choice really. He asked for Members to focus on the constitutional issues, because the focus was how to proceed. The policies and context can be explained, but it was about one provision and as far as he knew there was only one thing at hand. This was that there was a provision which the President believed was unconstitutional, which basically was warrantless searches. What has been established came from the very same Cabinet which the President leads and the Committee did not make the amendment. Both Adv Jenkins and Mr Momoniat indicated that the provision was left more or less untouched, although there was nothing wrong with the President now having reservations. The issue was simple: now that the Committee was where it was and given the Joint Rules, there was a simple question which was what was to be done with this single provision. There were two submissions to take into account and each of these can be entertained to the extent that they deal with the particular clause. Beyond that, Parliament could suggest to the executive that it could change the Bill, but this would have to be justified. It must be clear that the Chairperson has no choice and that there was only one issue on the table. He asked for the Committee to focus on what to do about the referral and how it was to proceed. One thing which he had already started working on was independent senior counsel opinion. He had conferred with the authorities concerned, because there was no case to say there should not be a senior counsel opinion.

Mr Maynier said then could the first proposal to request the President’s documentation be agreed to.

The Chairperson said that would be discussed.

Mr Maynier asked how many warrantless searches FIC had conducted in the three or four years before the constitutional challenge. Everyone appreciates that there is a sense of urgency, not least because of the looming FATF deadline and there was an appetite to deal with this by today. Could the Chairperson indicate why that was not possible, following discussions with the powers that be in Parliament.

Mr Kwankwa said he would like to know whether there are delays in obtaining warrants and what was the frustration before starting to talk about warrantless searches. This matter needs to be taken back to party caucuses, so that parties can get their own legal advice and be guided on the matter. In his opinion, warrantless searches seems to be giving too much power to an institution, because what is to be done when the institution falls into the wrong hands. Members talk about the powers of the President and say that South Africa legislated for Madiba. When this matter was debated in the House the previous day there were a lot of conspiracy theories about the President, but when he looked at the matter these would be legitimate concerns for any Parliament. So Members must not treat it with reservation simply because it is coming from President Zuma, because it important for Members to deal with the matter properly for the future.

The Chairperson asked for comments on how to proceed, then more policy matters could be addressed.

Mr Buthelezi said this was not a matter which could be finalised presently and he aligned himself with Ms Kekana and Mr Kwankwa that it should be taken back to caucuses. What would happen if the Bill is taken back to the President and he still holds this same view? The fact that the President must sign means he has to apply his mind, meaning there is the possibility for the same outcome. Therefore, the Committee should not rush the process.

Mr P Mabe (ANC) said he want to emphasise the point made by Mr Kwankwa and Ms Kekana, that it is important to get the Parliamentary Legal Advisors to advise the Committee on the timeframes. From the presentations it was clear that this has bearing on a number of other legislative undertakings. Even if Members were to agree to a process, sufficient work would not have been done without considering the timeframe. When he was conferring with the Chairperson he came to understand that certain things are prescribed in the Constitution, especially the timeframes set for Committees to deal with such a referral.

The Chairperson said it was the Joint Rules which stated the process and the question remained, was there a timeframe.

Ms T Tobias (ANC) said it is clear that Members need to go and reconsider the provisions which have been deemed unconstitutional. When doing so as parties, Members should also take into account what Mr Maynier was saying about looking at documentation which argues the provisions are unconstitutional. Members have been advised by the Parliamentary Legal Advisors, but another should be sought to enable a juxtaposition of the two and the President’s opinion. This will help to formulate a reconsidered position, within the timeframes.        Treasury needs to be given an opportunity to reassess the provision, because it was not changed by Parliament. Members will then consider their views. A holistic approach should be taken and when the Committee returns it will take decisions on matters including whether the Committee is going to accept further public hearings, because it was attracting more public opinion. The Joint Rules must be checked to see whether public hearings can be reopened or whether it can simply proceed. Adv Jenkins should advise around what process was followed in the reconsideration of the other Bills referred back by the President due to unconstitutionality. Were there additional public hearings or did the Committee limit its consideration to the reservations.

Mr Maynier said the Chairperson would at some point bring Members back to his proposal. Further, he proposed to amend the programme in the first term to ensure that the relevant processes have been followed and the Committee had dealt with the Bill. This would allow the House to debate it at the earliest plenary date which would be 21 February 2017. Further, if the Bill was then sent to the President on 21 February 2016, would this be within the FATF deadline?

Ms Tobias said the FICA Bill was not a Money Bill and there is no urgency to debate before the Budget. This was not a Money Bill so it should not be pre-determined when the Bill would be discussed and the Chairperson should be left to decide dates and the programme would be adopted as and when it was required.

Mr Kwankwa said following on his caution to not make laws for President Zuma, that by just looking at warrantless search provisions it could very easily work against the opposition in the future. What stops these institutions from victimising businesses which are sympathetic to opposition causes. Members must not be short sighted and think about chasing certain individuals. It is about general application and making sure everyone is treated fairly. Members must look at this point holistically.

The Chairperson said Mr Kwankwa was absent during the deliberations on this point and there was nothing unique about this provision, because it is there in other legislation. Warrantless searches under exceptional circumstances are the norm under the Criminal Procedure Act. So these issues have been discussed and what had changed to reopen the debate, aside from the President’s referral. The policy is clear, warrantless searches are warranted. The point of parliaments around the world is to circumscribe the circumstance in which they occur. It is impossible to deal with certain types of crimes, without warrantless searches. If no is said to warrantless searches in principle, then a lot of post 1994 law would have to be undone. So this was raising a fundamental issue and should the issue not be under what circumstances should warrantless searches apply, who should carry it out and what are the protections from abuse. Mr Kwankwa would have read in the papers that even SARS gets challenged in court and people’s property is returned due to unlawful searches. The Committee must be clear what was being done here, the focus is on the constitutionality. He directed the Committee to deal with the matter at hand which was that the President’s lawyers have found that the provision for warrantless searches is unconstitutional and the Committee’s job is to decide how it is going to proceed on the matter. There can be party political positions on what this should be, but there are some aspects which whether Members belong to one party or another, are required by the Joint Rules.

In anticipation of a response to the PPF, which wanted to make an oral submission, he had asked for an opinion from Adv Jenkins. The Committee is to decide for itself whether to accept written or oral opinions, but they must apply to whether clause 32 is constitutional or not. This Committee has had people make submissions the previous week and why must the Committee now refuse the PPF or CASAC. What party caucus is required to decide this? The Committee has since July 2014 argued that people are free to come to Parliament. If the PPF has a problem with the Bill that is their right, but they must focus on the issue at hand. What Members must decide on is whether there are only written submissions or written and oral, as one aspect of the process. Secondly, if this is not decided today, then on 24 January 2017 the Committee could reconvene and state that although this Committee has allowed anyone and everyone to make submissions, the majority is against it. He would be interested to know why now submissions should not be entertained.

On the appointment of senior counsel, he was accountable to the Office of the Speaker of the National Assembly. So, the second issue was whether Members had a problem with senior counsel.

The third issue was that beyond looking at this particular issue, whether there are any matters which Members want to raise. That is a matter for political parties to determine, but on the process he was confused if Members argued they needed to caucus on those two process issues.

Further, he did not think the Committee should be bound by an FATF stipulation. It would not be the end of the world if the Bill was passed by the end of the first quarter. Questions around South Africa’s sovereignty and FATF were separate and could be discussed in caucuses.

He agreed it was not a matter of how people saw the Presidency, it is simply whether there are merits in the reservation or not. This was not something which Members could decide, because they must be guided by lawyers. His responses in the debate were to the EFF, which was presenting it as if the ANC study group would be supine and just submit. He repeated that the fact that the President’s lawyers have found the provision unconstitutional, does not per se make it so. Parliament must come to its own independent determination. The Committee has three choices: Parliament can disagree with the President, meaning he is to take the provision to the Constitutional Court. Secondly the provision could be deleted and thirdly the provision can be amended, to take account of the President’s concern. That could be determined by party caucuses, but he did not see why the Committee could not decide on public hearings and the appointment of senior counsel.

Mr Kwankwa said he used the term warrantless searches in the context of what is before the Committee from the President. In later input the Chairperson highlighted the challenges with ensuring that there are some kind of limitations, even the presentation indicates that the problem is that the discretion was overly broad. His point was that when it came to such legislative issues Members should tread carefully. The reason he made the point about legislating for President Zuma, was the impression given to members of public during the previous day’s debate. To some extent, parties across the board may have misled the public. He had thought the process of caucus consultation and the formal process would run concurrently. He thought that matter had been concluded.

The Chairperson asked if Members have any objections to having public hearings limited to the referral and appointing senior counsel.

Ms Kekana said she did not have any objection, nor did she think any Member would. It has been the Committee’s practice to allow submissions even up to the last minute. She would argue that both oral and written submissions be allowed. The FIC had indicated that there was technical legal advice which the Committee should source and she thought that was what informed the decision some days ago to obtain a senior counsel opinion. Members are in full support of that.

Mr Mabe said the Chairperson’s experience in Parliament is helpful, because there may be other legislation at other levels which may need special attention, because the experience in South Africa has been that these things could easily be abused. Twenty years is long enough for Members to know the trajectory to be taken to protect the interest of all citizens, regardless of political divide. The basis of the existence of the different political parties is that they may want to be in power someday. To look at legislative undertakings with a view to resolving a Zuma problem, may come to bite the opposition when it is in power. He was sure that the DA had seen with its experience of 100 days in Johannesburg that laws are laws and they cannot be easily changed. If the ANC has legislated against xenophobia, you cannot come into power and start legislating something which instigates xenophobic behaviour. He also agreed that public participation is an important cornerstone of our participatory democracy, but unless the issues are directed to what is at hand the Committee may lose focus. The legal team in Parliament will have to crystallise the real issue being dealt with, including speaking to some of the legal opinions already received. Even as Members entertain public participation, they are able to put forward the parliamentary process.

Ms Tobias said the Chairperson had misconstrued her point when she said the procedure should be checked. That is why she had said that the Joint Rules should be checked, she did not make a suggestion that people must not come for public hearings. The approach is going to be clear and she just wanted to re-confirm that senior counsel advice was going to be received. She wanted to point this out lest Members begin dealing with aspects that they should be discussing at a later stage.

The Chairperson referred Members to Adv Jenkin’s letter, because he was going to attach it to the response to people who have requested to make submissions. Mr Maynier had asked why it did not work out that the FICA Bill process could be completed presently. He had spoken to Mr Frolick, Adv Bhengu and Adv Jenkins to see how long it would take. The response he received was that you could not simply get a senior counsel opinion. The Chairperson must get three options and Parliament would look at them. Then on the night of 30 November 2016, ANC Members had indicated that they were not likely to be present on 9 December 2016. Mr C Frolick (ANC) told him in no uncertain terms that he would not be able to sign off on the senior counsel. The Secretary to Parliament does not like Committees appointing senior counsel, except in cases like the present one. The Committee therefore would not be able to get a senior counsel opinion by Friday 9 December or even the following week. Further, he indicated that Treasury had requested a senior counsel opinion, which had still not been received. Even if the Bill was voted on today, what would be the point? If this was rushed then it would indicate to interested parties that the Committee is just doing the work nominally, not paying it due attention.

He also wanted to clarify that there is a broader issue which Members must apply their minds to. While we are part of a globalised financial system, need investment and the interventions are beneficial; we must also recognise that we are a developing country in a particular phase. Therefore, we need to adapt to the phase of development. He remained convinced that the FATF deadline should not be the guiding light for the Committee’s completion of the process. What would be the harm in saying it would be done by the end of the first quarter. There has been a lot of interest in what he had said in the House, but on that matter he was unapologetic. Parliament cannot be seen to be supine, Parliament cannot be told by any President, even Madiba, that a Bill is unconstitutional and Members tremble. That is not the way Parliament worked and the Committee would not tremble for any President, it has nothing to do with President Zuma. No lawyer or team of lawyers was sacrosanct, Parliament must get its independent opinion, which is what it was doing. If Members feel the Bill is unconstitutional then it would be amended, but if there is consensus among lawyers that it is not, then there would be no amendment. That is what a Chairperson is supposed to say in the context of a constitutional democracy. He noted that there were other issues which are surfacing and he would urge parties to get a mandate around things such as South Africa’s place in relation to FATF and the like. As he understood it with public participation the Committee is to ask for written submissions and if they wish to come for oral these could be accepted. However, these would have to be limited to the constitutionality of the provisions. Would it be reasonable to request their legal opinions and what has happened with the other referrals due to unconstitutionality? Mr Maynier had raised the point that if the Committee is to proceed and decide, then the Bill does not have to do not have to go to the NCOP.

Adv Jenkins said as this is a section 75 Bill with a substantive defect, it goes straight from the National Assembly to the President.

The Chairperson said on how the public hearings are to be managed on 24 January 2017, how would this be done?

Adv Jenkins said the mandate which the Committee has from the House is to simply look at the problem with the Bill. Parliament is spending money and time on this exercise and should be limited to the mandate. So if someone comes to make submissions and raises other matters, the Chairperson’s duty would be to focus the presenter. On a review of the Bill itself, Parliament has decided that the Bill is fine and this cannot be reopened again. So definitions of persons who are deemed high risk are set. He could not see a problem with a client giving the legal opinions they have requested. It would certainly help to get those, but in the end Parliament must make up its mind.

The Chairperson summarised that the Committee would get independent legal opinion ready by around 15 January 2017. The public should also be exposed to the legal opinions and the hearings should be advertised for 24 January 2017. The advert should be drafted and put out around 7 January or perhaps now. Then, where possible, request that people provide legal opinions. As he was not particularly interested in talking to the media, he would issue a statement summarising the present meeting. The statement would indicate that the Committee has received a briefing from Parliamentary Legal Services, FIC and Treasury; that the Committee feels there should be public hearings, appoint independent counsel and the matter is really around the constitutionality of the impugned provisions. If there was consensus one way or another then Members will be relieved, because this was not a policy matter. If Members receive a mandate from their parties, then a separate process of reviewing warrantless searches broadly. Ultimately the Committee only has three options: amend the Bill to make it more constitutionally sound. Secondly, not amend anything and refer it back to the President. In which case the President accepts or refers to the Constitutional Court. Thirdly it could propose to delete the clause. If the Bill is returned to the President, whether amended or not, would he normally refer it to the Constitutional Court?

Adv Jenkins said there are no timeframes and whether it is amended or not, the President will probably get a second legal opinion. The President can only refer the matter if he does not agree and it is a formal application, which is to be served on Parliament.

The Chairperson asked if the Committee cannot come to agreement, could Parliament refer a Bill to the Constitutional Court.

Adv Jenkins said no, the Bill was still that and had not been signed. In the interim there was such a provision

The Chairperson said that that rules out the possibility, if there is insufficient consensus among the lawyers, for Parliament to refer it to the Constitutional Court. He asked whether the Committee could raise matters beyond the constitutionality in its report to Parliament.

Adv Jenkins said he would advise against it, because the process in the House according to the Joint Rules is limited to the reservations by the President.

The Chairperson said the Committee should do what is required by law. It could do another report on the policy matters to take forward which could be tabled in the House. He felt the Committee should tread carefully and do what the Rules require. He knew what was going to invariably happen, which was that people were going to raise issues about FATF and politically exposed persons. So the Committee’s statement would go along those lines, emphasising the constitutionality, but accepting that there are policy issues which could be addressed. If people speak outside the terrain, then the Committee will have to manage that appropriately. He would issue a short statement along those lines, because he would not be taking any calls from the media.

Mr Maynier said he was waiting on the number warrantless searches conducted and for an answer to his proposal that all relevant documents from the Presidency be discovered by the Committee. Further, he felt there was a sense of urgency and the Committee should commit to getting this matter dealt with within the procedures so that it can be debated on the first committee meeting day, which is 21 February 2017 according to the preliminary programme. The sugar tax is hardly as important as this matter.

The Chairperson said he would like the ANC’s response on this. The Committee was tending towards reporting on the broader policy issues around the Bill and the position of South Africa in relation to international bodies. He felt that trying to artificially meet the FATF deadline should be abandoned, but the Committee will seek to meet it. The Food and Allied Workers Union (FAWU) marched on Treasury about the sugar tax and the Minister of Finance can regulate this tax. Therefore, the Committee wants to have public hearings. He did not have a position on the sugar tax himself, the ANC would have to come to the correct position and strike the right balance. Therefore, he did not think the Committee should drop the sugar tax. On meeting the deadline, the Committee would try to process the Bill expeditiously and with due consultation.

Mr Buthelezi said he thought Members had agreed with the process going forward. He was not sure why Mr Maynier would like to see the documents informing the President’s reservations, because the fact is that the President has come to that determination and that is what Members should deal with. The process outlined by the Chairperson was the crux of what the Committee would pursue in dealing with the matter.

The Chairperson asked what the process had been with the referral back of the Minerals and Petroleum Resources Development Amendment Bill.

Adv Jenkins said there the defect was that the Bill had not been referred to the National House of Traditional Leaders. That had now been done and the Bill was referred back to the President.

The Chairperson asked what had been the process with other Bills referred back and do Committees request these documents. Further, does Parliament have the right to call the President’s lawyers to seek clarity. What was the normal process and Members can decide on the specifics later?

Adv Jenkins said Parliament has not called for those documents, sometimes the Bill will be referred back with a letter stating the reasons and perhaps public submissions received by the President. It has been inconsistent and of the 11 Bills some have come with documentation and the Committees have not requested the President’s legal opinion. For public submissions to be requested is also rarely done.

The Chairpersons said he would consult with the Office of the Speaker and at this stage the President’s legal advisors were not being called. If it is necessary, the Committee will look into it. Thus that matter should be left in abeyance awaiting further advice. Adv Jenkins had indicated that this has not been done before, but the Committee as creating new precedent consistent with what the process is supposed to be. The President’s legal advisors may want to appear, because they should have the right to explain what is in the written opinion provided. Whether this has been raised by Mr Maynier for adversarial reasons, should be separated from what a popular Parliament is supposed to do. He repeated Mr Maynier’s question about how many warrantless searches there have been. He asked how many inspected parties have taken the matter to court and what the outcome had been.

Mr Smit said since 1 April 2011 when the FIC started doing inspections there have been 930 inspections up until the end of March 2016, which is the audited figure reported in the Annual Report. All of these were warrantless searches, where the inspected party consented. At another stage it may be useful to hear from supervisors how inspections function and what information is provided to the inspected party beforehand. There is a fairly rigorous process to ensure informed consent, so that the inspected party knows what the purpose of the inspection is and on what basis the consent is being given. The one case where consent was not given was the Auction Alliance case which was an inspection to have been done by the Estate Agents Affairs Board, where there was serious frustration experienced. After the Constitutional Court reading-in which provided for a warrant to be sought, one was applied for and at every point the application was opposed. To his knowledge the warrant still had not been obtained and the inspection is in abeyance. That is a prime example of the frustrations which can be experienced due to a concerted effort to obstruct the process.

Ms Tobias said Members were entering into the discussion which they are supposed to be having later in the process, because the gist of the matter is the constitutionality and once these sorts of questions are entertained Members may feel the need to engage. She had suggested limiting the present discussion to process matters.

The Chairperson said he had raised it because it had been raised by several Members, but strictly he was out of order. It would be good if the public hearing could be at the same time as the briefings by Parliamentary Legal Services, FIC and Treasury. The first session would be these bodies and the second would be the public submissions.

Mr Maynier said the answer to his question was that 930 searches were conducted without a warrant due to consent. He concluded from that that the FIC had conducted 0 warrantless searches; meaning a search where the inspector reasonably believes that they would be able to obtain a warrant.

The Chairperson said Ms Tobias was correct, but two Members had raised this and in fairness he would allow an answer.

Mr Smit said the FIC has not conducted any searches where it believes it would have obtained a warrant, because that provision is not yet in the law and the FIC has no authority to conduct such a search.

The Chairperson said the Committee support staff should note that as a question answered.

Adoption of minutes
The Chairperson suggested that the minutes tabled be adopted generally; rather than go through each individual set. This had been done for the past two years, but if the majority of Members wished to go through them individually, that could be done.

Mr D Maynier (DA) said he was happy to adopt minutes in general, provided the Chairperson confirms that any amendments which the DA has put to the various Bills are included or attached to those minutes.

The Chairperson said they would be attached.

The Committee adopted all the minutes.

Meeting adjourned.

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