Reserve Bank ‘probes Baroda’
BANK of Baroda is being investigated by the Reserve Bank over money held for companies controlled by the politically connected Gupta family, a person familiar with the matter says
The Reserve Bank’s probe, which comes after it fined Baroda in June for not doing enough to combat financial crime, was sparked after the Organisation Undoing Tax Abuse (Outa) alleged in court papers, that mine rehabilitation funds held for two of the Gupta family’s companies had been mismanaged and used to repay loans, the person said.
While there is no clear evidence that the trust funds were used as collateral or mismanaged, Bank of Baroda may have breached its own rules about having significant exposure to certain clients, said the person, who asked not to be identified because the matter is confidential.
Bank of Baroda holds as much as R1.75billion on behalf of trusts for the mines and by law that money must be used for environmental rehabilitation, Outa said.
Bank of Baroda, which is the only lender in South Africa still offering services to companies linked to the Guptas, is seeking a court order that would allow it to close the accounts.
The lender’s Johannesburg-based unit was fined R11-million by the Bank in June and issued with a directive to improve its monitoring and reporting of unusual transactions, the most severe sanction aside from being shut down.
Spokesmen for the Bank of Baroda and the Gupta family did not respond to requests for comment.
The Reserve Bank also declined to comment.
Outa’s chief operating officer, Ben Theron, said this week the organisation had asked its attorneys to inquire whether its allegations prompted another investigation into Bank of Baroda, but they had not yet had an answer on the matter.
The Guptas had their accounts closed by the four biggest banks last year because the lenders were concerned they would fall foul of regulations aimed at combating money laundering and other financial crimes.
In the 10 months to end-July 2017, Bank of Baroda reported 36 suspicious and unusual transactions related to the Guptas’ accounts with a combined value of more than R4.25billion to the Financial Intelligence Centre, Manoj Kumar Jha, head of the Bank of Baroda’s South African unit, said in court papers filed in August.
After the Reserve Bank fine, the Bank of Baroda told the Guptas and their companies on July 6 that their accounts would be terminated within 11 days and all loans recalled by the end of last month.
After talks, the bank agreed to delay the account closures to September 30.
While the Guptas and their companies have fought this in the High Court in Pretoria and the accounts are still open, the Bank of Baroda has said the terminations are “not negotiable”. — DDC
UNDER WATCH: Baroda is being probed for holding money for Gupta-controlled firms, say sources