Questions for Bank of Baroda

HT made multiple attempts to elicit a response from BOB. The bank responded by arranging two meetings with their CEO P.S. Jayakumar, only to cancel at the last minute.

Here are the questions we asked them, edited for brevity.

(1 ZAR = ~5.32)

South African reserve bank penalty

The SARB imposed two penalties on BOB: a ZAR 1 million fine for breaching the daily cash limit, and a ZAR 10 million fine for non-compliance with section 42 (1) (d) of South Africa's Financial Intelligence Centre Act, which would enable the Bank to spot and report suspicious transactions.

Why does a bank of Bob’s stature, operating in 25 international jurisdictions, have inadequate anti-money laundering protocols? Has this penalty prompted a review of Bob’s procedures in other jurisdictions?

Loan to wife of South African President Jacob Zuma

On June 29, 2010, BOB extended a loan of ZAR 3,840,000 to Bongekile Gloria Ngema Zuma, wife of South Africa's president Jacob Zuma. Documents viewed by HT indicate that, despite Ms. Ngema Zuma attesting that the loan would be repaid by her own funds, the loan was in fact paid by a Gupta investment company.

At the time of extending the loan, was the BOB aware that the loan for President Zuma's house would be repaid by a private company? If yes, what steps did BOB take to ensure that the loan would not be repaid by laundered funds obtained through corruption?

If no, why not?

What are the circumstances under which Ms. Zuma became a BOB client? Is it correct that she was introduced to the bank by the Gupta family?

Bob employees requesting favours

In October 2012, BOB Senior Manager Ramesh Salian's work permit application was forwarded to Ashu Chawla, a Gupta company director, who sent it further to Jack Monedi, chief director of permits at South Africa’s department of home affairs with a request to expedite Mr Salian's work permit.

Is it normal practice for BOB to enlist the help of their clients in processing work permits for their employees? Does Bank of Baroda see any conflict of interest/violation of banking ethics in relying on a client to influence government departments in a foreign country for the bank’s business?

On February 17, 2014, Sanjiv Gupta, chief executive at BOB, South Africa, requested a summer internship for his son Archit at a Gupta company. Subsequent emails indicate that the Guptas provided a summer internship and also an air ticket for Sanjiv Gupta's son Archit. The flight details are: Emirates Flight EK 515, Delhidubai - Johannesburg, departing on May 10, 2014, and a return leg on EK 762 flying Joburgdelhi on July 19, 2014.

Is it normal practice for BOB employees to request summer internships for their children from their clients, and to accept gifts like air tickets for personal use? Does BOB see any conflict of interest requesting such favours from clients?

A hotel bill indicates that on from July 22, 2014 to July 24, 2014, Bob's senior executive and former South Africa chief executive Murari Lal Sharma stayed in the Taj Palace Hotel in New Delhi as a guest of Rajesh Gupta, of the Gupta family, whose accounts were supervised by Mr. Sharma.

Can BOB clarify if Mr. Sharma was availing of the Guptas' hospitality in his personal or professional capacity?

Does the BOB have any codes of conduct governing accepting gifts and hospitality from clients?

In light of this information, is it a matter of concern that Mr. Sharma is now general manager for asset recovery at BOB in Mumbai?

Lending to Gupta proxies

In 2011-12, BOB extended a ZAR 16 million overdraft facility to a South African company called Everest Global Metals Pty Ltd, but the Gupta company. Emails between Everest and Gupta company executives confirm that the Guptas were servicing the loan, while an email from an official BOB address , dated November 13 2012, to JIC confirms BOB was aware that Everest’s overdraft was being paid for by JIC.

What was the purpose behind giving the loan to one company, with the understanding that it would be repaid by an unrelated entity?

Was this because the BOB was already over-exposed to Gupta companies, and so decided to give a loan to a shell company with the understanding that the money would be routed to the Guptas?

Politically Exposed Persons / Closure of accounts by other banks

In December 2015, BOB designated 35 Gupta company accounts as belonging to Politically Exposed Persons or PEPS, including Sinqumo Trust — managed by President Zuma's wife and Mabengala Investments, partly managed by Duduzane Zuma, President Zuma’s son.

Why did BOB wait till 2015 to designate these accounts as PEP, when it was clear from 2010 that these accounts were associated with the highest office in the country?

Documents submitted in court indicate that BOB was aware that major South African banks were shutting Gupta accounts, and auditor KPMG was severing its relationship with the Guptas in June 2016.

Why did it take BOB another 12 months before formally attempting to severe business ties with the Guptas on July 1 2017?

Apart from South Africa, the Guptas also have BOB accounts in Dubai, the US and India. Is the Bank moving to close these accounts as well? What steps has the bank taken in this regard?

Purchase of Optimum Coal Holdings: December 2015 to May 2016.

On March 4, 2016, BOB offered a letter of comfort indicating that the Guptas had sufficient funds to buy Optimum Coal Holdings (OCH) for ZAR 2.15 Billion. According to the sworn testimony of OCH’S bankruptcy practioner, Piers Marsden, the Gupta offer was accepted on the basis of Bob’s letter of comfort, but days before the transaction was concluded, the Guptas did not have the money.

In November 2016, South Africa’s Office of the Public Protector concluded that “the conduct of the BOB appears highly suspicious” in the wording of the letter of comfort. An audit of BOB found they did not flag 32 different transactions totalling nearly ZAR 2 billion.

Can BOB explain why, having designated the Gupta accounts as PEPS, the bank decided to provide a letter of comfort, and structure the purchase of Optimum Coal Holdings by offering three loans (collateralised against fixed deposits)? One of the pre-requisites of handling PEP accounts is increased compliance monitoring.

Can BOB explain why they did not flag suspicious transactions in connection with the Optimum purchase?

Loan against mine rehabilitation trust funds:

On June 6, 2017, BOB granted a loan of ZAR 150 million to the Guptas against a collateral of ZAR 170 million maintained by the Koornfontein mine rehabilitation trust. But under South African law, a company is merely a custodian of mine rehabilitation trusts and cannot encumber such trusts in any way.

On what basis did BOB accept the fixed deposits of the Koornfontein Mine Rehabilitation Trust as collateral for a loan extended to a Gupta company?

Was the bank aware that it could not, by law, seize this deposit if the loan defaulted?

What due diligence did the bank