The SARB, through the Prudential Authority is responsible for the regulation and supervision of registered banks in the Republic of South Africa.
The Banks Act, 1990, however, provides that no person may conduct the “business of a bank” unless such a person is a public company and registered as a bank with the PA
The “business of a bank” is defined in the Banks Act, 1990 and can be described as the soliciting or advertising for, or the acceptance of, deposits from the general public as a regular feature of the business in question.
The PA is afforded certain powers in terms of sections 81 to 84 of the Banks Act, 1990 to control the activities of unregistered persons. These activities are, however, confined to illegal deposit-taking only.
The above-mentioned provisions provide, among other things, that the PA may do the following in respect of unregistered persons that are suspected of taking deposits from the general public in contravention of the Banks Act:
Apply to court for an order prohibiting anticipated or actual schemes involved in illegal deposit-taking.
Extract information from unregistered persons.
Inspect the affairs of an unregistered person (i.e. Inspectors are appointed by the Governor or a Deputy Governor of the Bank in terms of the provisions of the South African Reserve Bank Act, 1989 (Act No. 90 of 1989).
Direct such a person to repay such money if the PA is satisfied that a person has illegally taken deposits from the general public.
Appoint a repayment administrator to manage and control the repayment of the money unlawfully obtained.
To the extent that pyramid and Ponzi schemes have an element of illegal deposit-taking, the PA will have the requisite jurisdiction/mandate to investigate. However, it must be stressed that it is on this basis that the PA is involved, and not on the suspicion of it being a Ponzi/pyramid or otherwise illegal activity. Conversely, if there is no indication of “deposit taking” as defined (hence a contravention of the Banks Act), then the PA will not have the jurisdiction to investigate, albeit that the scheme complained of is prima facie a Ponzi scheme, e.g. MMM
Since the PA neither registers nor supervises unregistered persons, it is generally not aware of such schemes unless it is informed thereof by members of the public. The PA therefore only reacts to complaints received from the general public that contain sufficient details and documentary evidence to justify the PA invoking its powers in terms of the Banks Act.