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BKB bank account above board, bank says

Mohalenyane Phakela

THE Standard Lesotho Bank says it allowed South African wool and mohair auctioneers, BKB, to open a bank account because the laws allow foreign companies to open accounts in Lesotho.

Standard Lesotho Bank said this in response to a demand by the Minister of Small Businesses, Cooperatives and Marketing, Chalane Phori, that the bank should explain how BKB managed to open a bank account before they were registered in Lesotho.

BKB only registered in the country in March this year. The company has been a broker for Lesotho wool and mohair farmers since 1974 and they have been operating from the Eastern Cape in South Africa. They opened an account with Standard Lesotho Bank in 1993 to facilitate payments to local farmers.

However, Mr Phori questioned how the company had been allowed to operate a business account in Lesotho for 25 years when they were not registered in the country.

“The business regulations of Lesotho forbid any company which is not registered locally to open a bank account with any of the local banks,” Mr Phori said.

“However, BKB has a Standard Lesotho Bank account which they have been using for the past 25 years.

“Standard Lesotho Bank has to furnish us with answerers as to how a foreign company manged to open such an account which it has been using to pay local farmers. I was responsible for the freezing of BKB’s account in January this year, asking the police to investigate where the money was from because we cannot prove it was from the wool and mohair sales since we know nothing about BKB financials.”

And in a recent email to the Sunday Express, Standard Lesotho Bank wrote, “We wish to submit that the Central Bank of Lesotho Foreign Exchange Rulings of 2013 recognise resident and non-resident customers where South African customers are classified as resident customers due to the Common Monetary Area which allows for free movement of funds among the members which include Lesotho and South Africa”.

“We affirm that there is no financial institutions regulation in Lesotho which forbids banks from opening accounts for foreign companies. Guideline 14 of the Financial Institutions (Anti-Money Laundering) Guidelines of 2000, which began the development of account opening requirements, states that ‘Financial Institutions shall exercise reasonable caution in their business and transactions with companies from other countries’ This in itself confirms that banks are indeed allowed to do business with customers from outside the country.

Standard Lesotho further states that the Money Laundering and Proceeds of Crime Act, states that what is imperative is for the banks to “know their customers and to understand their financial dealings so as to enable banks to manage risks prudently”.

“It is correct to say that the law on account opening requires banks to know and understand the purpose for which the account is being opened. The BKB account was opened for the sole purpose of effecting payments to Basotho farmers who supply the company with wool and mohair, and there was no need, legally or otherwise, for the company to register an office in Lesotho.”

The BKB account was frozen on 12 January this year on the orders of the Maseru Magistrates’ Court after an application by the police.

Police spokesperson Superintendent Mpiti Mopeli told the Sunday Express’ sister paper, the Lesotho Times that this was done to facilitate a police investigation into the “irregular” flow of money into the BKB account.

BKB subsequently appealed to the High Court on 17 January and they won the case on 23 January this year.

Lately there has been a war of words between Mr Phori and BKB.

A fortnight ago, the minister accused the company of disrespecting him and making ill-advised statements regarding the proposed changes to the marketing of Lesotho’s wool and mohair.

Mr Phori made the accusations after BKB’s wool and mohair general manager, Isak Staats had said that the minister had been ill-advised to amend the legislation to prohibit Lesotho’s wool and mohair from being sold to international buyers from South Africa.

For the past 44 years, BKB has been selling wool and mohair on behalf of 40 000 local wool and mohair farmers through an auction in the Eastern Cape. The company only recently opened a local branch as part of efforts to be allowed to continue trading with local farmers.

However, the government argues that the entire wool and mohair operation which is conducted in South Africa disadvantages Lesotho as the country does not receive any taxes from BKB hence the decision to have the transactions with international buyers conducted from Lesotho.

 

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