Bank of Bar­oda un­der in­ves­ti­ga­tion by the SA Re­serve Bank

Pretoria News - - NEWS - Re­nee Bonorchis

THE SOUTH African Re­serve Bank (Sarb) is in­ves­ti­gat­ing the Bank of Bar­oda over money held for com­pa­nies con­trolled by the po­lit­i­cally con­nected Gupta fam­ily, ac­cord­ing to a per­son fa­mil­iar with the mat­ter.

The probe, which comes af­ter the cen­tral bank fined the Bank of 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 the trust funds were used as col­lat­eral or mis­man­aged, the 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.

Outa said the Bank of Bar­oda held as much as R1.75 bil­lion on be­half of trusts for the mines, and by law that money must be used for en­vi­ron­men­tal re­ha­bil­i­ta­tion.

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 will al­low it to close the ac­counts.

The Gupta fam­ily, who are friends of Pres­i­dent Ja­cob Zuma and in busi­ness with one of his sons, have been ac­cused by politi­cians and civil so­ci­ety groups of us­ing that re­la­tion­ship to in­flu­ence state con­tracts and cabi­net ap­point­ments. Zuma and the fam­ily have de­nied wrong­do­ing.

Sus­pi­cious

The lender’s Jo­han­nes­burg-based unit was fined R11 mil­lion by the cen­tral bank in June and is­sued with a di­rec­tive to im­prove its mon­i­tor­ing and re­port­ing of un­usual trans­ac­tions.

Spokesper­sons for the Bank of Bar­oda and the Gupta fam­ily were not im­me­di­ately avail­able for com­ment. The cen­tral bank de­clined to com­ment.

Outa chief op­er­at­ing of­fi­cer Ben Theron said on Wed­nes­day that the lobby group had asked its at­tor­neys to en­quire if its al­le­ga­tions prompted an­other in­ves­ti­ga­tion into Bank of Bar­oda, but they had not yet re­ceived an an­swer.

Con­se­quences

The Gup­tas had their ac­counts closed by South Africa’s four big­gest banks last year. Bell Pot­tinger, the Gup­tas’ Lon­don-based pub­lic re­la­tions firm, col­lapsed last month af­ter it was found to have stoked racial ten­sions in South Africa in its work for the fam­ily.

Af­ter the cen­tral bank’s fine, Bank of Bar­oda told the Gup­tas and their com­pa­nies in July that their ac­counts would be ter­mi­nated within 11 days and all loans re­called by the end of Septem­ber.

Af­ter talks, the bank agreed to ex­tend the ac­count clo­sures un­til the end of Septem­ber. – Bloomberg

PHOTO: REUTERS

A Bank of Bar­oda ad­ver­tise­ment in Mum­bai. While there is no clear ev­i­dence the bank’s trust funds were used as col­lat­eral or mis­man­aged, Bank of Bar­oda may have breached its own rules about hav­ing sig­nif­i­cant exposure to cer­tain clients.

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