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Gold Leaf Tobacco: SARS claims billions from Sasfin in Rudland money laundering debacle

Gold Leaf Tobacco: SARS claims billions from Sasfin in Rudland money laundering debacle
Illustrative image | Simon Rudland; Sasfin bank; SARS. (Photos: X | Supplied | Rawpixel | iStock | Gallo Images / Luba Lesolle)

In a novel case filed at the Gauteng Division of the High Court just before Christmas 2023, the SA Revenue Service aims to hold Sasfin Bank Limited liable for billions in damages the taxman said it suffered due to lost taxes. The SA Revenue Service alleges that at least R8.2-billion in untaxed funds, linked to the vast Gold Leaf Tobacco money laundering racket, were unlawfully sneaked out of the country over the past decade - mainly with the help of 11 Sasfin employees. This happened amid repeated warnings over the lapse of risk and control measures at the bank’s foreign exchange division.

The South African Revenue Service (SARS) filed a R4.8-billion damages claim against Sasfin Bank Limited, dated 22 December 2023. In an unprecedented step, SARS argues that Sasfin must be held liable for damages suffered by the revenue service because the bank facilitated large-scale tax evasion between 2013 and 2023. 

Our probe triggered a Sens announcement issued on Tuesday afternoon, 27 February, around the same time bank CEO Michael Sassoon answered questions sent to him on Friday, 23 February. 

The backstory here involves SARS’s initial findings in 2022 that at least five Sasfin employees assisted an extraordinary transnational plunder network operated by Zimbabwean tobacco boss Simon Rudland in moving at least R3-billion offshore without paying tax.

Read more in Daily Maverick: Simon Rudland’s Gold Leaf Tobacco used Sasfin Bank officials to launder its dirty cigarette money – here’s how

Sassoon at the time vehemently denied that as much as R3-billion could have washed through the bank’s system without senior management knowing. By October 2022, Sassoon acknowledged to Scorpio that the risk and control measures at the bank were found wanting. According to Sassoon, the bank had gone through stringent processes to ensure the crimes would not be repeated. Yet, SARS documents filed just before Christmas in 2023 suggest that the money that washed through Sasfin’s system was almost three times more than initially thought. Worse, perhaps, is that on at least three occasions in November 2022 and February 2023, long after Sasfin management was very much aware that the bank was probably harbouring criminals, large sums were again unlawfully moved offshore. 

In this latest court action, SARS told the Gauteng Division of the High Court in Pretoria that investigators found that 19 companies linked to Rudland’s business operations used the Sasfin system over the course of a decade to unlawfully – and mostly unnoticed – sneak R8.2-billion offshore. On the back of fictitious invoices and incomplete documentation these funds were moved from company accounts held at Sasfin to accounts in destinations like Dubai, Switzerland and Mauritius. Daily Maverick wrote extensively about the initial allegations.

To hide the crimes, Sasfin employees conspired to wipe the payments off the Sasfin system and the relevant companies’ bank statements. Cross-border money movement Bopcus reports to the SA Reserve Bank were also deleted. Sasfin managers seemingly remained blissfully unaware of these shenanigans until SARS’s extensive Rudland investigation reached the Sasfin shores. On Tuesday, Sassoon was at pains to say that independent investigations “found no evidence of any involvement by senior management or directors” at Sasfin. These investigations did unearth an undisclosed number of employees involved, whose contracts were terminated. Sasfin opened criminal cases against 11 of its former employees, six more than the initial five eyed by SARS. 

In the December summons, SARS argues that Sasfin’s repeated negligence and lax controls allowed for the abuse and loss: “Sasfin breached its legal duty by directly or indirectly assisting the taxpayers and GLTC [Gold Leaf Tobacco Corporation] to unlawfully export the funds abroad…”

SARS argues that “Sasfin was at all relevant stages aware, alternatively ought to have been aware of the taxpayers and GLTC’s conduct and that the export of the funds abroad was wrongful and unlawful”. 

The summons consists of two claims. The first claim focused on 18 companies, all clients of Sasfin’s foreign exchange division, with names such as Chair Boyz (Pty) Ltd, Lone Eagle General Traders (Pty) Ltd and Ocean Twelve General Trading (Pty) Ltd. The companies collectively moved R5.33-billion from their local Sasfin accounts to unnamed offshore accounts, SARS’s summons states. Neither income tax nor VAT payments totalling R1.96-billion for the period under investigation were declared. SARS argues that Sasfin’s negligence caused the economic loss.

On the face of it, these companies mostly seem unrelated and some show signs of being shell companies. The inference in SARS’s papers, for reasons not disclosed so far, is that the companies, in various degrees, link to Rudland’s GLTC and are alleged to form part of a vast cross-border money laundering racket involving smuggled tobacco and gold. Some of the listed companies were mentioned in SARS’s 2022 successful ex parte case in which the revenue service seized control of the local assets held by Rudland and business partner Ebrahim Adamjee.

All but four of these 18 companies are in the process of closing down or had already closed down (a deregistration process at CIPC). The local subsidiary of the German construction equipment seller Putzmeister SA (Pty) Ltd is one of the few legitimate companies listed in the SARS papers. According to SARS, the company unlawfully moved R67.89-million out of South Africa in the nine months ending in February 2019. amaBhungane revealed how former company management got caught up in the illicit activities.

Read more in Daily Maverick: THE LAUNDRY, Part One: How shape-shifting ‘money launderers’ infiltrated SA banks

The second claim relates to tobacco products manufacturer GLTC. Between June 2016 and May 2018, GLTC’s local Sasfin account received R2.9-billion in undeclared funds. 

SARS told the court that GLTC owed R4.46-billion in income tax and VAT by May 2023. 

Investigations suggest GLTC locally does not have the available assets and resources to settle its tax debt in full. The shortfall “at least” will be the sum of these undeclared funds. For that reason, SARS holds Sasfin liable for another R2.9-billion for “damages suffered”.

Read more in Daily Maverick: Sasfin Bank will ‘rigorously’ defend itself against SARS’s R4.87bn damages claim

In total, SARS says it is owed R4.8-billion in damages for the taxes it now cannot raise because these companies either closed down or do not hold enough local assets to pay the damages claim. 

Sassoon consulted a heavyweight legal team who are of the “unequivocal” opinion that the SARS claim “has a very remote likelihood of success”. The team includes professor Dale Hutchinson, professor Michael Katz, Aslam Moosajee and Advocate Wim Trengove SC. 

“On the basis of this strong legal opinion”, Sassoon said, “we concluded that the [SARS] claim will not result in the recognition of any liability.”

Sasfin has no choice but to energetically challenge the claim: The bank’s balance sheet will buckle under a near R5-billion loss. Sasfin’s annual financial statements for the year ended June 2023 shows the bank holds R14-billion in assets. Its single largest asset was its loans and advances of R9-billion. Cash and cash equivalents was stated as R866-million. A local tax expert consulted by Scorpio confirmed there “has never been a claim in South Africa where SARS argues a bank should be held liable because its negligence has caused economic loss”. The tax expert said SARS will fight an uphill battle to prove “wrongfulness”, an opinion shared by Sassoon’s team. Scorpio’s tax expert further suggested that the courts are generally “reluctant to expand on the doctrine of economic loss”. 

Neither the SA Reserve Bank nor SARS confirmed by the time of publishing whether criminal charges in the matter were laid with the Hawks or police. DM

Gallery

Comments - Please in order to comment.

  • Lew Lipschitz says:

    SARS are the worlds biggest scroungers…and deadbeats to boot. I’ve been waiting for a R35k tax refund going on two years!! Quick to take but very slow to pay out what is rightfull due to the taxpayer!!.

    • HENK CRAUCAMP says:

      I disagree with your statement. Out of all the public entities SARS is in part the only entity that tries to function properly. Trust me when I say, I don’t like SARS let alone needing to pay tax for service we don’t receive. But the reality is if big businesses like GLTC and SASFIN don’t get hammered for these losses to Us, then you will never see your R35k rebate as there would be no funds to pay you. In my opinion, SASFIN will get a rap over the knuckles and we as a nation will be out of billions. The financial institutions are a law to themselves, they hire big named lawyers as sated above and get away with it. Reminds me of the 2008 financial crisis and the bail out to banks, the big losers were the man on the street. Just another Steinhoff scam…we will never see that money again…

      • M D Fraser says:

        I confirm Henk’s comment. I have received nothing but courteous and prompt service (including refunds) from SARS. Mainly, I suppose, because my tax affairs are always up-to-date and in order.

        • William Kelly says:

          As are mine and yet two years for VAT refunds? I am afraid SARS’ credibility is fast eroding. Interesting too that their prosecution, or is that persecution team appears to have a lot more money and teeth than the NPA. Begs the question – what rands value is attached to life?

    • Louis Fourie says:

      There is a tax ombud. SARS does not delay payout unless there is a disagreement. The biggest problem with taxation is that taxes are not spend with the same due diligence and oversight as what is used for collecting taxes.

    • D'Esprit Dan says:

      Always submitted my returns on time, been audited a couple of times, provided the needed docs and been refunded within days of SARS being satisfied. Very good service – that said, their VAT refunds can take months to pay out, which for small businesses, especially those with large foreign trade exposure as a portion of income, it can be crippling.

  • Ben Harper says:

    Won’t go anywhere, the anc are at the top of this food chain. If in doubt, watch “The Gold Mafia” documentary released by Al Jazeera

  • Robert Pegg says:

    My company has had an uphill battle to claim over R1 million in VAT owed to us for over a year on exported equipment. The people dealing with it at SARS are clearly incompetent. We just received a quarter of the amount refunded, with no interest. We have to resubmit all documents again after 1 March then they will repay the remainder, without interest. If we are late with any tax or VAT payments, we are charged interest and penalties. So much for fair treatment by SARS.
    In future we will purchase equipment from foreign suppliers to avoid this situation.

    • William Kelly says:

      Same here. Seems SARS has two sets of rules and they could care less about their obligations to lawful tax payers.

    • Andrew Wallace says:

      Very similar experience to yours, IE: a year of repeated uploading and finally getting a full refund. Not so sure that i agree on the incompetence angle, rather that there is a cashflow problem. SA Inc spends more than it earns and so SARS has to roll the money and hence they delay refunds.

    • Miss Jellybean says:

      Be very careful importing SARS have the right to declare import VAT not claimable on certain things. We had a refund of over R150,000.00 due to customs VAT and our claim was rejected. After 7 months of jumping through hoops submitting every document know to man they decided that the customs VAT on some of our imports was not claimable. Also import VAT is calculated at 15% + 1% so you are actually paying 16,5% VAT that might not get refunded to you

  • Louis Fourie says:

    Does this mean we can sue the ANC for damages due to State Capture and all the corruption?

  • Geoff Coles says:

    Seems odd that a Bank can be blamed for collusion among its employees.

    Is it any wonder SA is grey- listed regards foreign dealings.

  • Iam Fedup says:

    In a perceptual battle between an entrepreneurial bank with a clean track record, and the ANC-influenced, incompetent, crooked SARS, I know where I’ll place my bet. Now that they have stolen everything, they are looking everywhere where white businesses are involved, even as tenderpreneurs buy villas in Dubai.

  • NICK GREENE says:

    The article is not about SARS service and whether a reader received their own outcome.
    Lawyers, and other, may have their own opinions on this matter. The best outcome is to have the matter ventilated in a court of law, where the fiduciary responsibilities of bankers (and others) can be discussed against their actual performance. It is about time that directors and senior managers are held accountable for actions within their organisations.
    SARS may have gone for one bank in this matter, however, I feel (and hope) that directors and senior managers in other banks and services firms (legal, auditing, etc) are nervous that their complicity in State Capture, dodgy client dealings and the continuing corruption may place them in a similar position to the folk at Sasfin.

  • Ben Harper says:

    Also bear in mind the very minister that put the ban on the sale of tobacco products during covid was in bed with the illicit tobacco traders

  • Chris Bean says:

    Maybe I missed something, but why doesn’t SARS simply bring a civil freezing order in Mauritius Dubai and Switzerland. Then the money stays lwhere it is until either party can successfully prove liability to pay taxes or not.
    Just because civil freezing orders are practically non existent in the RSA doesn’t mean that they can’t be used in those 3 jurisdictions where the money is. I know for a fact that they can.
    SA law in this area is still in the 18th century and many SA lawyers have no knowledge of how these proceedings work
    Chris Bean . B.A. LL.B (Wits) LL.M University College, (London) – Not the fake variety either.

  • Just Me says:

    Sassfin is guilty and should, at the least loose it’s banking license.

  • craig white says:

    strange that when Tom Moyane then SARS commissioner authorized a criminal VAT payout to a GUPTA company , neither SARS , MOYANE or any of the banks that were involved in sending the Funds off – shore illegaly were prosecuted ? wonder why ? all the GUPTA s minimum ZAR 15.5 Billion went offshore via banks …. no prosecution , maybe its becasue ANC was their business partner ….. just mentioning for a friend ……

    • Kenneth FAKUDE says:

      Gold leaf was the reason why TM was appointed to sars, last time I checked a Zuma somebody was in business with the said company.
      I bought machinery from china and was fined R5000 for using a code I found on the Sars website for the machinery on the import documents.
      When people are paid for services not rendered where is sars?

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