CITIBANK EXECUTIVES FACE CRIMINAL CHARGES IN SOUTH AFRICA FOR ALLEGEDLY ENGAGING IN “CORRUPT” COLLUSIVE CONDUCT

In the wake of Citibank entering into a R69 million settlement agreement with the South African Competition Commission (SACC), the Bank’s executives now face the threat of criminal sanctions as well.

Citibank’s settlement follows the SACC’s complaint referral in which it is alleged that up to 18 banking entities had engaged in collusive conduct in contravention of the Competition Act by allegedly manipulating the Rand/Dollar exchange rate through forex trading.

Citibank was one of the first respondents to settle their case with the SACC, however, on 21 April 2017, an independent organisation, the Black Empowerment Foundation (BEF), formally laid criminal charges against Citibank’s top executives at a South African Police station.

The allegations by the BEF include, inter alia, that Citibank had engaged in corrupt activities resulting in Citibank having “generated profits at the expense of ordinary South Africans”.

The BEF have also indicated that they would write to the President and the National Prosecuting Authority in an effort to elevate and expedite this case.

Importantly, as of 1 May 2016, the Competition Act was amended in order to criminalise cartel conduct – as prohibited in section 4(1)(b) of the Competition Act. It is not yet clear whether the criminal complaint laid by the BEF is based on a section 4(1)(b) contravention or a broader complaint of ‘corruption’ which is dealt with by other legislation, such as the Prevention and Combatting of Corrupt Activities Act.

The introduction of criminal liability for contravening the Competition Act has, however, been contentious. There have been a number of concerns raised by competition law practitioners regarding the manner in which a criminal investigation would be conducted. In this regard, it is important to note that the competition authorities are not responsible for investigating or adjudicating criminal matters. This function is reserved for the National Prosecuting Authority and the criminal courts (i.e. the High Courts).

Furthermore, section 4(1)(b) of the Competition Act prohibits cartel conduct per se (meaning that there is no rule of reason defence available to a respondent) which means that the threshold of contravening the Competition Act is relatively low. It is unlikely that this low threshold would suffice in respect of a criminal case.

It is further unclear to what extent any evidence gathered by the SACC may be used by the National Prosecuting Authority in a subsequent criminal complaint.

It is understood that there is currently a Memorandum of Understanding that is busy being drafted between the SACC and the National Prosecuting Authority which may provide greater clarity in relation to certain of the procedural aspects surrounding a criminal prosecution. To date, however, this MoU has not been published and little guidance has been provided by the respective agencies as to how they intend conducting criminal investigations and prosecutions.

Although it remains to be seen whether the criminal charges laid by the BEF will ultimately be prosecuted by the National Prosecuting Authority, the case is likely to take centre stage in the next few weeks as the entire investigation and referral of the banks by the SACC has been questioned and concerns regarding political influence has dogged the SACC since the decision was taken to refer the matter earlier this year.

It is also not yet clear why the BEF elected only to lay criminal charges against Citibank and not the other respondents. Collusive conduct by its very nature necessitates more than one party to be implicated.  The BEF may simply be waiting until additional banks enter into settlement agreements (in which an admission of liability is generally a requirement) with the SACC before laying further complaints. Regardless, the BEF’s complaint is likely to have a significant impact on other respondents who may be considering settling with the SACC.

With the threat of a maximum prison sentence of up to 10 years and/or a fine of up to R500 000, this complaint will not be taken lightly by Citibank and all eyes will not only on Citibank, but also on the respective enforcement agencies to see how they will respond to the criminal charges brought by the BEF.

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