Sasfin Bank is confident that the R4.87-billion civil summons (plus interest and costs) damages claim against it by the South African Revenue Service (SARS) will not see the light of the courtroom for several years yet. 

Sasfin’s chief executive, Michael Sassoon, pointed out that this is a claim for damages and has nothing to do with Sasfin’s tax affairs. Sasfin has concluded that the claim will not result in the recognition of any liability and does not affect its capital position.

However, the bank noted in a Sens announcement on Tuesday that it intends to defend the claim, and given that this involves a defended trial action, it only expects the matter to go to trial in several years’ time. 

The summons, which was received on 9 January, relates to SARS’s purported inability to collect income tax, value-added tax and penalties allegedly owed by former foreign exchange clients of the bank. 

In the Sens announcement, Sasfin said former foreign exchange clients of Sasfin Bank operated as a syndicate that ran an unlawful scheme to facilitate the expatriation of money out of South Africa and colluded with former employees of the bank who operated outside the scope of their employment.

“The bank took decisive action when it became aware of this unlawful scheme, including instituting an expanded investigation led by an independent forensic consultancy. This resulted in the termination of relationships with the implicated clients and employees and the opening of criminal cases against them,” Sasfin said. 

It should be noted that the Sens announcement was triggered by an ongoing investigation and questions sent last Friday by Daily Maverick’s Scorpio division. 

Read more in Daily Maverick: Gold Leaf Tobacco: SARS claims billions from Sasfin in Rudland money laundering debacle

The documentary Gold Mafia, broadcast by Al Jazeera last March, also showed how rogue Sasfin employees were allegedly colluding with representatives of the Gold Leaf Tobacco Corporation to syphon billions in dirty money from South Africa’s illicit cigarette trade to safe havens in the Middle East. 

After receiving the summons in January this year, Sasfin obtained a legal opinion from ENS, authored by chairperson Michael Katz, the head of internal research, Dale Hutchinson and dispute resolution lawyer Aslam Moosajee. The report, which we understand is less than 10 pages long, was endorsed by Advocate Wim Trengove SC. The legal opinion was unequivocal that the claim falls outside of the recognised parameters of applicable law and has a very remote likelihood of success.

Moosajee told Daily Maverick that the legal opinion was shared with SARS, but no response had been forthcoming. 

“You get losses that arise from bodily injury or damage to property, and those losses are generally presumed to be wrong. Then the court considers whether those losses were caused by the intentional or negligent conduct of a particular party. And if so, whether the wrongful and negligent or intentional conduct caused the loss was the proximate cause of the loss,” he said. 

However, Moosajee said that when it comes to a pure economic loss, “unless there is a recognised duty under which a court has recognised such a delictual claim, our courts are very reluctant to extend categories of liability for pure economic loss. Usually, [with] a defendant’s conduct taking the form of an omission — the court starts on the premise that that conduct is prima facie lawful.”    

‘No merit’

Sassoon said: “We are confident that the SARS claim has no merit. We have filed a notice of intention to defend the matter, which we will do rigorously. It is unjust for banks to be held liable to SARS for taxes that their clients have failed to pay.” 

SARS’s claim relates to the expatriation of money going back to 2014, in which a criminal syndicate colluded with former employees of Sasfin Bank who were operating outside of their scope and authority of employment. 

As soon as Sasfin became aware of the collusion, it took decisive action and instituted an independent investigation which resulted in the termination of relationships with implicated clients and employees and the opening of criminal cases against them. 

Further background

In its 2022 annual report, Sasfin noted it had commissioned a leading international audit firm to thoroughly investigate the allegations and determine whether any employees or clients were involved, and how the alleged financial misconduct had occurred. 

The evidence gathered from the investigation showed that a group of Sasfin employees in the foreign exchange business unit had colluded with the implicated clients to enable the circumvention of exchange control and anti-money laundering regulations, as well as to subvert our system of internal controls. 

“All implicated employees have been dismissed, and criminal cases have been opened where appropriate,” says the annual report.

The report also stated that an investigation mandated by the Prudential Authority of the SA Reserve Bank looked into allegations that Sasfin Bank had contravened the Financial Intelligence Centre Act, the Banks Act and exchange control regulations. Other allegations included that certain prescribed officers and the board may have failed to adequately discharge their duties under the Companies Act and the Banks Act.

However, a separate auditor report by PwC verified that the suspected reportable irregularity was no longer taking place. Sasfin’s 2023 annual report published in December 2023 notes that to date, the group has terminated relationships with implicated businesses through which the syndicates had operated, and has disciplined implicated employees, resulting in terminations and the opening of criminal cases where deemed appropriate. DM