Re­serve Bank ‘probes Bar­oda’

Daily Dispatch - - Business - By RE­NEE BONORCHIS

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

Pic­ture: CHRIS RATCLIFFE

UN­DER WATCH: Bar­oda is be­ing probed for hold­ing money for Gupta-con­trolled firms, say sources

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