OVERVIEW: Cabinet task team, ANC delegation asked Standard Bank to keep Gupta accounts open

Deputy Chief Justice Raymond Zondo. (News24)
Deputy Chief Justice Raymond Zondo. (News24)

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17 Sep 2018

READ: Then President Jacob Zuma's response to Zwane's statement on September 2, 2016

Statement of Minister of Mineral Resources is not Government position

2 September 2016

The statement issued by the Minister of Mineral Resources, Mr Mosebenzi Zwane yesterday on 1 September 2016, on the work of the task team established to consider the implications of the decisions of certain banks and audit firms to close down the accounts and withdraw audit services from the company named Oakbay Investments, was issued in his personal capacity and not on behalf of the task team or Cabinet.

Minister Zwane is a member of the task team. He does not speak on behalf of Cabinet and the contents of his statement do not reflect the position or views of Cabinet, the Presidency or Government.

The unfortunate contents of the statement and the inconvenience and confusion caused by the issuing thereof, are deeply regretted.  

The Presidency wishes to assure the public, the banking sector as well as domestic and international investors of Government’s unwavering commitment to the letter and spirit of the country’s Constitution as well as in the sound fiscal and economic fundamentals that underpin our economy.

17 Sep 2018

READ: Zwane's statement on the closing of the Gupta accounts on September 1, 2016. 


1 September 2016  

On 13 April 2016, Cabinet established an Inter-Ministerial Committee (IMC) to consider allegations that certain banks and other financial institutions acted unilaterally and allegedly in collusion, when they closed bank accounts and/or terminated contractual relationships with Oakbay Investments.  

The IMC was chaired by myself as the Minister of Mineral Resources. The situation warranted close scrutiny by Government because of the impact that the actions would have, not only on job losses for 7500 South Africans but also the impact that it would have on investor confidence. The IMC conducted a number of meetings with various banks, financial institutions and insurance companies as well as with representatives of Oakbay Investments.

Although the Minister of Finance was a member of the constituted IMC, he did not participate in its meetings. A Report of recommendations was tabled at Cabinet.

After discussion of the Report, Cabinet has now resolved as follows:

-a. To recommend to the President that given the nature of the allegations and the responses received, that the President consider establishing a Judicial Enquiry in terms of section 84(2)(f) of the Constitution;

b. To consider the current mandates of the Banking Tribunal and the Banking Ombudsman. Evidence presented to the IMC indicated that all of the actions taken by the banks and financial institutions were as a result of innuendo and potentially reckless media statements, and as a South African company, Oakbay had very little recourse to the law.

Looking into these mandates and strengthening them would go a long way in ensuring that should any other South African  company find itself in a similar situation, it could enjoy equal protection of the law, through urgent and immediate processes being available to it as it required by the Constitution;

c. To consider the current Financial Intelligence Centre Act and the Prevention of Combatting of Corrupt Activities Act regarding the relevant reporting structures set out therein as evidence presented to the IMC was unclear on whether the various banks and financial institutions as well  as the Reserve Bank and Treasury complied with these and other pieces of legislation.

The IMC was also briefly ceased with the implications of legal action against any of these entities and the potential impact that would have on the volatility of the Rand as well as the measures that could be put in place to protect the economy.

This was not something that fell within the mandate of the IMC and should therefore be considered by the Judicial Enquiry;

d. To re-consider South Africa’s clearing bank provisions to allow for new banking licences to be issued and, in so doing, to create a free market economy. The IMC was presented with evidence suggesting that the South African banking system is controlled by a handful of clearing banks  which ensured that every other local or international bank participating in the South  African banking sector would need to go through these clearing banks in order to have their transactions cleared, thereby creating an oligopoly. Evidence was also presented that these institutions may have placed undue pressure on banks that sought to assist the company by subjecting them to unwarranted auditing processes.

It is unclear why the Reserve Bank will not issue new banking licences to other banks and this would need to be given careful attention by the Judicial Enquiry as it did not fall within the purview of the IMC; and

e. The establishment of a State Bank of South Africa with the possible corporatisation of the Post Bank being considered as an option. Evidence presented to the IMC suggested that all of South Africa’s economic power vests in the hands of very specific institutions, institutions who have shown that their ability to act unilaterally is within their mandate and is protected.

These institutions are owned by private shareholders and report to National Treasury who in turn do not need to act on information provided to it. It was further agreed that the IMC would monitor the process of finalising these matters and would report- back to Cabinet on their progress.

Statement issued by the Department of Mineral Resources, 1 September 2016  

17 Sep 2018

The hearings have ended for Monday and will again continue on Tuesday. 

7 things you should know from the commission's hearings on Monday: 

- After Standard bank closed Gupta-linked accounts in 2016 over fears it may become mixed up in possible money laundering or corrupt transactions, it was called to three meetings. These were meetings with Oakbay leadership, with top ANC officials, and with an inter-ministerial committee of Cabinet chaired by then Mines Minister Mosebenzi Zwane. 

- Standard Bank says at each of the meetings it was asked why it was closing the accounts, what it would say in reaction to the perception that it was part of White Monopoly Capital, and what would happen to employees at Gupta-linked enterprises if the accounts were shut. 

-Standard Bank says it replied each time that it was following the law. It says it informed the ANC delegation and the Cabinet task team that it cold not discuss its relationships with specific clients. 

- According to the bank's legal counsel Ian Sinton, the Cabinet task team informed him and Standard Bank head Sim Tshabalala that the bank should risk non-compliance with the law and keep the accounts open. He says either Zwane of Oliphant made this remark. 

- Zwane, according to Sinton, then said as a member of the ruling party he had the ability to get the law changed, whereby it would become illegal for banks to close accounts. 

- Sinton says at the meeting with Oakbay,  then Oakbay CEO Nazeem Howa confirmed he asked the ANC to intervene on his behalf and had written letters to various people in government and the president to intervene on Oakbay's behalf. 

- Sinton further says that Oakbay wanted Standard Bank to transfer over a billion rand in mine rehabilitation funds to an account at the Bank of Baroda, claiming that the bank of Baroda had better interest rates. This was before the decision was taken to close the Gupta accounts. 

17 Sep 2018

Zwane in 2016 reportedly also recommended to Cabinet a drastic change to the Banks Act that would allow the finance minister to control bank licences.

Read Fin24's article published in late August 2016 

Zwane wanted Sarb role changed after Gupta blacklisting - report

17 Sep 2018

At the time the ANC officially distanced itself from Zwane's statements about the judicial inquiry into banks, with then party spokesperson Zizi Kodwa calling Zwane's statement “outrageous, appalling and shocking”. 

Read News24's article from September 2016. 

Zwane statement reckless - ANC

17 Sep 2018

Subsequent to the meeting, Sinton says Zwane released a statement on behalf of the task team proposing a judicial inquiry into the unilateral closing of bank accounts. 

Zuma later released a statement saying Zwane's statement was not official government position, saying it was "in his personal capacity". 

17 Sep 2018

Standard Bank says it wrote a follow-up letter to the inter-ministerial Committee outlining its views. It said that while there appeared to be a sectary taking notes during the meeting, it has not seen official minutes yet. 

After the bank sent the letter, it said it received an email thanking it, but nothing more. 

17 Sep 2018

According to Sinton, the committee said the bank should risk non-compliance with the law and keep the accounts open. He says either Zwane of Oliphant made this remark. 

Former Minister Zwane, according to Sinton, then said as a member of the ruling party he had the ability to get the law changed, whereby it would become illegal for banks to close accounts. 

Sinton says Zwane suggested the bank should be more responsive to concerns raised by government, 

Zwane, according to Sinton, then asked what changes the bank would need to see in order to keep banking with the Gupta-linked entities.  

17 Sep 2018

The commission has now moved onto a meeting with certain Cabinet members part of an "inter-ministerial committee" after the Gupta accounts were closed. 

 The meeting took place in Pretoria around May 5. 

The committee - chaired by Mineral Resources Minister Mosebenzi Zwane - included Zwane, Oliphant and Mzwanele Manyi, says Sinton. 

Manyi was introduced as an advisor.  

Sinton says he explained to the committee that the bank could not talk about specific clients, but could talk more generally about its work. 

17 Sep 2018

Sinton says the Standard Bank team explained to the senior ANC leaders that it has to be extremely careful lest it fall foul of anti money laundering or anti-corruption laws. 

"Having explained all of that, the meeting did go on to talk about the issue of the closure of the Gupta accounts. We were asked to comment on the perception that we were part of WMC," he says. 

Sinton says the bank was asked to comment on perceptions that Standard Bank was taking instructions from business people in Stellenbsoch. He says Standard Bank head Sim Tshabalala got angry with the line of questioning. 

The meeting was oral, there were no documents, he says. The bank later sent a letter to sum up the meeting. 

17 Sep 2018

Proceedings have now resumed. 

It will now focus on the meeting with the ANC.  

The ANC was represented by Gwede Mantashe, Jessie Duarte and Enoch Godongwana, says Sinton. 

He says Sinton made it clear to the ANC it cannot discuss affairs of any customers but could talk more generally about how it goes about closing accounts. He says the ANC seemed to accept this was reasonable. 

17 Sep 2018

The commission is taking a short adjournment for tea. After the break Standard Bank's legal counsel is expected to give an account of a meeting with the ANC that the bank was called to after it closed Gupta accounts in 2016. 

Sinton has only referred to aspects of the meeting so far, including that ANC members - who he has not yet named - asked the bank why it was closing the Gupta-linked accounts and whether it was part of White Monopoly Capital who wished to see black business-people fail. 

17 Sep 2018

Sinton is now talking about a meeting Standard Bank had with Oakybay after the bank announced that it would be closing Gupta-related accounts. 

He says at the time leaders from the Oakybay group - including Ronica Ragavan - called the bank to a meeting to say what had been published in the media about corruption was not correct.

Oakybay executives also argued that as the Gupta brothers had resigned their directorships from Gupta-linked companies, they were not anymore involved in the running of the companies. 

Sinton says that Oakbay also wanted Standard Bank to move over a billion rand in mine rehabilitation trust funds from Standard Bank to the Bank of Baroda. 

Standard bank viewed this request as suspicious.

He says Nazeem Howa, in the meeting with Standard Bank, confirmed he asked the ANC to intervene on his behalf and had written letters to various people in government and the president to intervene on Oakbay's behalf. 

Sinton says during the meeting with the ANC, Standard Bank was grilled about whether it was part of White Monopoly Capital and was trying to drive black businesses out of South Africa. 

17 Sep 2018

Sinton is asked what Oakbay's reaction was?

Oakybay embarked upon a media public campaign to induce the banks to reverse the decision, says Sinton.  

He says banks received a request to meet with the ANC at Luthuli house, as well as and what was described as an inter ministerial committee of Cabinet.  

Zondo asks about the ANC meeting and the committee. 

Sinton says the bank agreed to attend the ANC meeting as it would be "respectful". 

17 Sep 2018

Sinton is now asked why the Gupta accounts were closed in 2016. 

"It really started with Absa bank," says Sinton. He says it was reported that Absa bank chose to terminate the relationship with entities in this group. 

This started an internal investigation. KPMG then announced they were terminating their auditing relationship with the Gupta-linked entities, while former deputy finance minister Mcebisi Jonas went public so say that he was offered R600 000 for the job of finance minister. 

These and others matters - including then Mines minister Mosebenzi Zwane's alleged trip to Switzerland with the Guptas to sell Optimum coal mine - to raised suspicions and concerns, says Sinton. 

Standard Bank also banked the controversial Estina dairy project. 

Sinton says that, taken together, the bank had in 2016 reasonable suspicions that if it continued to bank Gupta-linked entities it may have fallen foul of anti-corruption and anti-money laundering legislation.  

17 Sep 2018

On April 6, 2016 Standard Bank told Gupta-related entities and President Zuma’s son Duduzane Zuma in writing that it would be terminating their banking relationships. They were given a grace period of two months. 

Banking services ended on April 6, 2016. 

Sinton says the bank monitors the media, and has a team looking out for suspicious transactions, in case it inadvertently contravenes any laws by facilitating corrupt payments or dealing in the proceeds of crime. 

If it has reason to believe something may be amiss, it gathers further information. 

A committee takes a decision about whether it ends banking relationships, or not. 

"If it is compelling [...] we take a decision to terminate the relationship," he says.

Depending on circumstances, the client may be asked to explain suspicious transactions.

Sinton, asked by Zondo about how accounts are closed, says banks cannot do business with a client if there is reasonable suspicion that they have been involved in corrupt or illegal activities. 

17 Sep 2018

Evidence leader asks Sinton to explain the adverse consequence should Standard Bank fail to comply with domestic and international regulations over suspicious transactions, He says failure to comply exposes standard bank and employees to fines and prison times.

17 Sep 2018

Sinton says part of his job was to mitigate legal risk, which includes complying with the law. 

He runs over legislation. 

He says the Financial Intelligence Centre Act obliges banks to report all suspicious transactions. Failure to report is a criminal offence. 

The Prevention of Organised Crime Act, meanwhile, deals with money laundering. Banks cannot in anyway be involved in dealing in the proceeds of crime, says Sinton. 

The Prevention of Combating of Corrupt Activities Act means banking systems cannot be used o facilitate corrupt transactions, he says. 

17 Sep 2018

Ian Sinton, general counsel at Standard Bank, is first to give evidence. He has worked as a lawyer at the banking group since 2002. 

He was appointed the bank's group legal counsel in 2008. He retired in June this year, but has been retained by the bank. 

17 Sep 2018

In 2016, the country's big four banks decided to close Gupta-owned bank accounts after they detected several suspicious transactions.
#StateCaptureInquiry: Banks to deliver evidence in the closure of Gupta related bank accounts

17 Sep 2018

Deputy Chief Justice Raymond Zondo has arrived for the start of this week's testimony at the Zondo Commission of Inquiry. The head of the commission’s legal team explains the focus will be on the closure of Gupta accounts by banks. 
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