BOOK EXTRACT: The apartheid arms money machine

In this extract from his explosive book published this week, Hennie van Vuuren reveals the fullextent of the international network created to help the apartheid regime illegally buy weapons, which has been described as one of the most important global money laundering schemes in history

Apartheid Guns and Money: A tale of profit by Hennie van Vuuren

Jacana Media

624 pages


How do you smuggle half a trillion rand across the globe without anyone noticing?

In 1977, with the prospect of international arms sanctions looming, the securocrats in Pretoria needed a plan. The clichéd brown envelopes and duffle bags of cash were not going to cut it. Not only did they have to move large volumes of money between thousands of people and entities, but they needed to do so in absolute secrecy. They needed banks that could keep secrets. They needed bankers who wanted to make money and maintain white supremacy – bankers who could help design and maintain one of the largest and most complex sanctions-busting operations the world has known. Not only were the bankers central to prolonging the crime of apartheid, but some actively participated in the conspiracy of money laundering. Despite this, both banks and bankers remain today as feted models of success. The public remains oblivious of the role they played at the time.

This is their story. It has remained largely unexposed since the end of apartheid. It winds through front companies in Liberia and Panama, and bank accounts across the globe, to bespoke banks in Belgium and Luxembourg that were at the centre of an international criminal enterprise. This was one of the most serious and sophisticated examples of sanctions busting the world has seen. A system of hundreds of front companies supported a grand conspiracy, which, for 20 years, was the conduit for 70% of the cash used by South Africa to buy weapons illegally. This was the arms money machine, one of the most sinister pieces of secretive corporate and banking architecture constructed during apartheid. Its scale has for decades been covered with a blanket of secrecy, in this way hiding a history of collaboration, profit and repression. Only now are we able to reveal the scale of this crime and the people who inspired it, and we turn our attention to the Kredietbank of Belgium and its subsidiary in Luxembourg.

Kredietbank, now known as KBC Bank, is the 18th-largest bank in Europe and employs 51 000 people, serving 11 million customers across the globe. KBC survived the 2008 banking crisis thanks to a Belgian government bailout. It staved off the wolves through taxpayers’ money and the sale of its prized asset, the private banking subsidiary Kredietbank Luxembourg (KBL), to the Qatari investment fund Precision Capital for more than €1 billion (almost R15 billion at today’s exchange rate).

An important figure in Kredietbank who became central to the South African money laundering scheme was André Vlérick. For more than two decades, he filled several senior management positions at the bank, first as deputy chair from 1974 to 1980 and then as chair of the board from 1980 to 1989. Shortly before his death in 1990, he was appointed as honorary chair.

In the 1960s, Vlérick began a career as an academic, becoming something of a guru in the new science of executive management, and he set up the Vlérick School of Management, now one of Europe’s top business schools with more than 20 000 alumni, at the University of Ghent. The business school’s fortunes and that of its founder are closely tied. In 2006, Vlérick’s widow bequeathed the school €50 million.

In 1977, Vlérick helped found a powerful lobby in Belgium called Protea, after the iconic South African flower, whose members were described as existing in an orbit around the country’s two largest banking institutions, Kredietbank and Banque Paribas. According to the Belgian newspaper De Morgen, “in reality, the Protea club operates as a propaganda organ, behind which significant Flemish South African business interests shelter, which for their own interests defend the racist minority government in Pretoria”.

André Vlérick had his own view of the aim of his pro-Pretoria group, which he chaired for 13 years: “Protea does not turn the clock back, but turns it in a good direction.”

The 142 founding members of Protea all had political clout; 46 of them were mostly centre-right members of the Belgian parliament.

For his efforts, the South African government awarded him the Order of Good Hope in 1987. The citation read: “Professor Vlérick is invaluable to the relationship between the Republic and Belgium, as well as in world fora.”

In addition to Vlérick’s ideological affinity with apartheid, Kredietbank was involved in creating a secret money-laundering system. The arms money machine was a massive operation, moving billions of dollars over almost two decades through approximately 850 bank accounts at KBL set up for this purpose. The sheer scale meant that its existence was undeniable, as was the nature of the money-laundering operation. A former Armscor official based in its Paris sanctions busting hub, Martin Steynberg, says that “the reducing of fund movements into less conspicuous sums and the regular drawing of large cash sums were methods typically utilised in money laundering, which indeed was the case here given that the channelling of the funds was directly linked with activities illegal at the times in question by reason of being sanctions busting”.

The 850 or more accounts at KBL were, according to Steynberg, either in the name of front companies or in numbered accounts as facilitated by KBL. There were certain accounts that tended to be main accounts for receiving funds or holding funds. The majority of the funds originated from Armscor’s bank in Pretoria, specifically the Volkskas Bank (today Absa) branch in Van der Walt Street. Steynberg refers to Volkskas as a “correspondent bank of KBL”.

‘The funds that originated from Pretoria were routed to Luxembourg via a trail of accounts maintained at a number of international banks around the world, including banks in New York and Singapore.”

In a further affidavit, Steynberg describes the money flow as including the use of “dark zones” and “jump accounts”, the purpose of which were primarily to break up the money trail and obscure its origin.

There can be little doubt that the arms money machine, with its many moving parts, facilitated sanctions busting on a massive scale. This was in violation of international law, purposely undermining the UN arms embargo and making such banks complicit in an international violation of human rights.

The evidence of Kredietbank’s history, its ideological support for the apartheid regime and its crucial role in allegedly hiding up to 70% of Armscor’s cash over a number of years suggest that the bank and its subsidiaries need to be held accountable for these actions.

Such systems ultimately rely on people who make them work. The effectiveness of this criminal enterprise relied heavily on André Vlérick and the pro-apartheid networks he fostered through Protea and other similar organisations across Europe. These men were central to this conspiracy. Vlérick is feted today, and students who graduate with “his” degree go on to lead private and public institutions across Europe and the world. The Vlérick family remains influential and André’s nephew, Philippe Vlérick, continues the legacy of his uncle as a director at Vlérick Business School, Almanij and the Kredietbank (KBC) Group. Belgian students and leaders should do the correct thing and ensure that the family name is no longer recognised as part of a public institution in this way.

Kredietbank and KBL, with little doubt, made money from racial oppression and war in southern Africa. They actively supported, aided and abetted apartheid. Accountability for these crimes is vital: not only to force contrition, but to ensure that these and other banks do not fuel conflict in the same way again.

That said, the banks were not the only collaborators. Their complicity was not exposed because the apartheid regime was reliant on other accomplices in intelligence agencies, arms companies, political parties and thousands of other influential supporters. They were driven by a mix of profit and ideology, supporting the regime with varying degrees of discretion. These allies were to be found across the globe. We start with the secret Armscor office in Paris – and an unsolved murder.

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For 14 free days, you can have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today. Thereafter you will be billed R75 per month. You can cancel anytime and if you cancel within 14 days you won't be billed. 
Subscribe to News24
Show Comments ()
Voting Booth
Who do you think should lead the Democratic Alliance after the party’s upcoming national congress in April?
Please select an option Oops! Something went wrong, please try again later.
John Steenhuisen for sure, he’s got the experience
64% - 1244 votes
Mpho Phalatse, the DA needs a fresh outlook
36% - 703 votes
Rand - Dollar
Rand - Pound
Rand - Euro
Rand - Aus dollar
Rand - Yen
Brent Crude
Top 40
All Share
Resource 10
Industrial 25
Financial 15
All JSE data delayed by at least 15 minutes Iress logo
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.