News / South Africa / State Capture

Makhosandile Zulu
4 minute read
12 Mar 2019
5:05 pm

Gupta-linked entities’ ‘suspicious transactions worried Standard Bank’

Makhosandile Zulu

The witness says the bank closed the accounts of Gupta-linked entities due to concerns over reputational risk.

Ian Sinton from Standard Bank gave evidence before the commission of inquiry into state capture, 17 September 2018. Picture: Dimpho Maja / African News Agency (ANA) 17/09/2018

Standard Bank’s retired head of legal, Ian Sinton, told the Commission of Inquiry into State Capture on Tuesday about suspicious transactions and money flows between Transnet, McKinsey and Regiments Capital, which led the bank to terminate its relationship with the two latter firms.

McKinsey and Regiments had a contractual relationship and did consultancy work for Transnet.

McKinsey provided consultancy services to the bank while Regiments held a transactional account with the bank, Sinton told the commission.

Sinton was subpoenaed to appear before the commission to identify the various Gupta-linked entities between which suspicious movements of money had occurred.

Domestic and international laws and regulations, which include the Financial Intelligence Centre Act and the Preventing and Combating of Corrupt Activities Act, among others, obligate the bank to flag and investigate suspicious transactions which, if found to be in breach of the law, should be reported to law enforcement agencies.

Testifying before the commission last year, Sinton said the bank took the decision to close the bank accounts of the Guptas and entities linked to the controversial family alleged to be at the centre of state capture for a number of reasons, which include reputational risk.

READ MORE: Media reports the main reason Standard Bank kicked Guptas to the kerb

Sinton said on Tuesday that in the second half of 2015, the bank noticed well-publicised reports concerning the Guptas, which included the family’s controversial landing at the Waterkloof military base, Absa having terminated all dealings with the Guptas and entities associated to the family, and KPMG’s withdrawal of auditing services from these entities.

Sinton said these were all red flags for the bank, which then set out to determine which Gupta-linked entities it dealt with. The bank used internal and external investigative resources to gather information to make its own assessment to determine whether or not to continue the relationship with the Guptas and their associated entities.

Sinton told the commission that Optimum coal mine, while under the ownership of Glencore before Gupta-owned Tegeta took over, had a transactional account with the bank and that Glencore had set up a trust account with the bank on behalf of the mine.

Shortly after the change of ownership of the mine from Glencore to Tegeta, a representative from the Guptas’ Oakbay – Tegeta’s controlling company – contacted the bank to enquire whether it would continue to provide services to the mine in light of the fact that the institution had terminated its relationship with Gupta-linked entities, Sinton said.

At a later stage, Oakbay, through Ronica Ragavan, instructed the bank to transfer the mine’s trust funds to an Oakbay account. This request was rejected, with the bank stating that the trustees and the minister of mineral resources would have to approve this transaction, Sinton said.

A few days later the trustees were changed and the newly appointed trustees then requested the bank to transfer the trust funds to the Bank of Baroda, Sinton said.

Again, the bank resisted, this time citing that the minister’s approval was required which, Sinton said, was forthcoming in due course.

Within a few days, the bank terminated its relationship with Optimum coal mine as a result of the change in ownership from Glencore to Tegeta.

Media reports on the relationship between Regiments and McKinsey were also a concern for the bank.

McKinsey and Regiments scored contracts at Transnet.

The bank requested a meeting with senior management at McKinsey, which included the firm’s head of risk. At the meeting, the bank expressed its concerns about the firm’s dealings at Transnet and Eskom.

Representatives from McKinsey were surprised by these revelations and made use of the services of local and international lawyers to probe the matter, assuring the bank that it would share with it its findings.

McKinsey later informed the bank that through its investigation it found that there was “reckless behaviour and bad mistakes” which were made but no wrongdoing, as media reports had suggested.

“Shortly after they commenced with their own investigation, we took the decision to terminate all dealings with McKinsey,” Sinton told the commission.

Sinton told the commission that Transnet would credit Regiments with a large amount, which would in turn credit the accounts of Shivita Pty Ltd and Homix, payments which he thought needed to be explained.

Salim Essa, believed to be an associate of the Gupta family, had nominated Shivita and Homix to receive payments from Regiments, which were his fees for ensuring that the company bagged a contract with Transnet.

A month-long bank statement for February 2014 which was tabled before the commission shows transfers of various monies into and going out of the Regiments’ bank account.

For more news your way, download The Citizen’s app for iOS and Android.