From Bosasa to Estina, Transnet and Eskom, compromised civil servants and political bigwigs have hogged the State Capture headlines.

But, bar few exceptions – McKinsey & Co, Bain and KPMG, Regiments Capital and Trillian – other professional service entities, particularly banks and lawyers, have escaped largely unscathed amid the noisy strikes against the Guptas and their cronies across the civil service.

Now, for the first time, the spotlight has turned on some South African and international corporate giants with findings and recommendations compiled in book form by Open Secrets and Shadow World Investigations.

Titled The Enablers, the 134-page book focuses particularly on the role of banks, consultants and lawyers and the conduct of some who may have facilitated, knowingly or unknowingly, criminal conduct that formed part of the State Capture enterprise. 

First published by the Financial Mail, the full report was released publicly on 6 February 2020 and has also been submitted to the Zondo Commission. 

The research team contends that investigations have thus far “overlooked” the role of these professionals and warn that a failure to “fully” and “energetically” interrogate their role would leave the work of the Zondo Commission incomplete and undermine efforts to guard against future abuses. 

“Sometimes this conduct constituted gross negligence, but the evidence all too often suggests intentional complicity,” the report states.

It names and examines the role of, among others, HSBC, FNB, Nedbank, Standard Bank and India’s Bank of Baroda in transactions involving Gupta-linked companies and/or their work at state-owned companies such as Transnet and Eskom. 

The research team comprising Michael Marchant, Mamello Mosiana, Paul Holden and Hennie van Vuuren, zooms in on some key transactions that have already come before the Zondo Commission. 

While highlighting the need to scrutinise the role of lawyers involved in the drafting of some of the controversial contracts, a large part of the investigation is centred on the role of the banks. 

This is a striking departure from the existing narrative that these financial institutions were effectively “victims” in the State Capture scandal following efforts by politicians to get them to reconsider their decision to shut Gupta accounts in 2016. 

Instead, the report calls on those banks to be summoned to testify at the Zondo Commission about why it had taken them so long to terminate the Gupta accounts and flags, among others:

• How HSBC failed to act on red flags. All the evidence in the public domain or in possession of the authors suggests that the bank should have swiftly identified that the Gupta-linked Tequesta and Regiments Asia accounts required monitoring, investigation and ultimately suspension in line with KYC (Know Your Customer) and anti-money-laundering obligations. The companies were set up in Hong Kong and registered in the name of Gupta kingpin Salim Essa in 2014 at a time when they had no discernible infrastructure or capacity to provide services. “Yet, within months of their formation, they were receiving millions of dollars in payments, purportedly for ‘advisory services’.” This happened despite the bank having shut other Gupta-linked front company accounts the same year, the book states.
• How the Bank of Baroda was the nerve centre of the Gupta enterprise’s banking operation, aiding it with laundering much of the cash extracted via the controversial Estina dairy project while “any half-decent” compliance officer should have spotted the round-tripping and smurfing of cash.
• That Nedbank ought to explain why it continued as the local correspondent bank for Baroda, especially once the family was expelled by local banks. Nedbank also has to be grilled on its participation in the controversial club loan arranged for Transnet and a controversial interest rate swap transaction involving the Transnet Second Defined Benefit Fund, the report states.
• How or why Standard Bank missed major red flags in the account activities of various Gupta companies including the controversial letterbox entity Homix, which has been implicated in laundering kickbacks related to deals with state-owned companies. Testimony at the Zondo Commission in 2019 by SA Reserve Bank official Shiwa Mazibuko explained that the Homix transactions raised almost “every single red flag for money laundering” and that it was inexplicable that Standard Bank did not pick up on those, or if they did, whether the bank actually acted.

“Those red flags included that the bank accounts were dormant for extended periods, following which they were subject to a massive spike in deposits. These deposits were immediately transferred out of the accounts, another obvious sign of money laundering,” the book states. 

“Standard Bank is not alone, however. As is shown throughout this submission, all South Africa’s banks, and several international banks, consistently failed to stop suspicious transactions,” the report states.

The banks had in some cases ignored or failed to spot and act on the suspicious “smurfing” (the chopping of large amounts into smaller ones) or the layering of cash moving through multiple accounts, both of which are generally money laundering red flags. 

It also calls on the Zondo Commission to get FNB to explain why it continued to provide banking facilities to the Gupta-linked Estina even after the company’s contract with the Free State government was cancelled and worse, after the true nature of the dairy project had come to light in the public domain. 

Andrew Feinstein, founder of the UK-based Shadow World Investigations outfit that collaborated on this investigation, told a media briefing: 

“It is my contention that the SA arms deal is the first example of State Capture in SA and Estina is one of the most egregious examples of State Capture.”

It is one of the most brazen cases of theft from the poorest of the poor, Feinstein said. 

The team’s submission to the Zondo Commission compellingly shows that the entire scandal was designed and used for the Guptas’ racketeering enterprise, Feinstein said. 

He said new findings contained in the report show that only 7% of the money paid to Estina by the Free State government was actually used for the dairy project. 

Some of the money ended up with SARS and the bulk with the Guptas’ offshore network, mainly in the UAE. 

FNB was one of three banks that gave the Guptas banking facilities for the Estina project and the company made a series of transfers totalling more than $8-million via Standard Bank. 

Yet, the most cursory of compliance checks would have warranted scrutiny of why a local agricultural project for the Free State was sending huge chunks of its cash to a Dubai company that had no history or an online presence suggesting it was in the farming business. 

Feinstein told the media briefing this was an example of how the Public Finance Management Act, the centre of public centre accountability, was “stomped” on. |

“When we asked FNB and Standard Bank about reports to the FIC and why they had given uninterrupted banking services to these companies, they maintained they had complied with their obligations.”

Hence it was important for these banks to be called to explain whether they filed suspicious transaction reports to the Financial Intelligence Centre and if they did, what came of this. 

Private “actors” must account for their role in the many State Capture crimes, said Van Vuuren.

The two organisations want the Zondo team to secure evidence, even if it means raiding corporate players. 

This is to determine whether or not they were knowing participants in the illegal activity or whether they satisfied their legal duties to prevent being unwitting partners in those crimes. 

More importantly, said Van Vuuren, the banks need to explain whether they had done enough to identify criminal intentions and to reveal how much they profited from such.

“There must be criminal liability for the men and women responsible, whether they live in SA or in Dubai,” Van Vuuren said. 

Among a set of recommendations put forward by Open Secrets and Shadow World are necessary reforms around the use of anonymous front companies and that the Zondo Commission releases an interim report to trigger urgent and necessary legal and regulatory reforms. DM

Read the full report at www.opensecrets.org.za