Existing networks leveraged
MONEY LAUNDERING ROUTES: SERVED WIDE RANGE OF CLIENTS OTHER THAN THE GUPTAS
Shadow World Investigations dig deep into kickback money flows from SOEs.
Sophisticated money laundering networks existed in South Africa before the Guptas, the Commission of Inquiry into State Capture, chaired by Chief Justice Raymond Zondo has revealed in Part VI Vol III of its report.
These networks were already plugged into international money laundering networks including in Hong Kong and China, “and they served a wide range of clients other than the Gupta enterprise”.
The networks used by the Guptas and other criminal enterprises were “embedded in a pre-existing milieu of criminality and wrongdoing”.
The Zondo commission retained Paul Holden of Shadow World Investigations to trace the money flows relating to kickbacks from massive irregular contracts with state-owned entities.
This revealed a vast international money laundering network to which the South African authorities, through ignorance or intent, were oblivious.
Holden submitted three extensive reports to the commission, restricted to the domestic money laundering networks, as it didn’t have offshore information gathering powers.
The Chinese companies which got the Transnet locomotive contracts used the money laundering network based in Hong Kong/China to pay the Guptas.
China South Rail and China North Rail merged to create the Chinese Railway Rolling Stock Corporation (CRRC).
Bank accounts at HSBC
CRRC paid kickbacks into HSBC bank accounts held by Gupta enterprises
in Hong Kong.
Between December 2014 and September 2016 some $145.2 million (about R2.34 billion) of kickbacks from the Transnet/CRRC contract was paid into the Hong Kong HSBC accounts.
An internal investigation by HSBC indicated that Regiments Asia, Tequesta and Morningstar, which received kickbacks for the Gupta enterprise, “showed that 92 of the companies receiving payments from these three entities held accounts at HSBC bank”.
Sixty were active, had received over 50 000 payments totalling $4.2 billion, and made payments to nearly 6 000 beneficiaries.
Regiments Asia, Tequesta and Morningstar also made payments to 55 of these beneficiaries.
The commission said the total value of onward payments was R3.78 billion in some 33 000 transactions.
HSBC’s investigation was limited to only 60 accounts paid by Regiments Asia, Tequesta and Morningstar, which represents only a “slither of the entirety of this global money laundering network” that has laundered billions of dollars internationally.
Kickbacks paid within SA
In SA, the kickbacks, comprising payments from third party companies in return for contracts with state-owned companies and government departments, were first paid into so-called “first-level” laundry entities.
The Gupta enterprises used “15 known first-level laundry entities”, which in turn fed into four separate laundering routes that were activated chronologically.
Some R1.2 billion in kickbacks was paid into the first-level laundries. Holden identified names, as
well as the money flows.
“The payments were made into international laundry networks by what Holden calls onshore-offshore bridges” which acted as the final stop of the local money laundering chain.
These bridges paid into a couple of different networks, from where the funds were “commingled with an extremely large number of cash payments from mixed sources”.
Some payments were eventually made back into Gupta entities or to entities with connections to Gupta entities.
The first-level money laundering network, known as Chivita, received R154 million from Regiments, Combined Private Investigations, Zestilor, Homix and Denel.
Between April 2014 and May 2015, Homix – part of the “second money laundering network” – received R395.4 million from state capture proceeds, and transferred R324 million to Bapu Trading, which made payments to known entities. Included was an amount paid to Hulley and Associates, which then settled former president Jacob Zuma’s bill with
Advocate Kemp J Kemp.
The third-level money laundering network of Forsure and Hastauf received R16.9 million and R12.4 million of state capture proceeds from Regiments.
Forsure received another R14.8 million from Albatime and Hastauf another R17.7 million from Albatime. IPocket Global paid Forsure R11.4 million and Hastauf R14.2 million.
The fourth network, dubbed by Holden as the “spider’s web”, received R314.9 million from state capture contracts.
Entities, individuals identified
Holden has identified all the entities, the individuals who received funds, and 12 companies which performed the function of onshore-offshore bridges for established money laundering networks within South Africa.
If South Africa is to recover any of these funds, it will first have to trace the location:
The South African authorities should engage with the HSBC for assistance;
The Financial Intelligence Centre (FIC) and the National Prosecuting Authority (NPA) should engage with their counterparts in Hong Kong and China to seek their assistance in tracing the funds paid into the Hong Kong/China laundry network using HSBC accounts;
The FIC and NPA should engage with their counterparts in Dubai for tracing of funds that were paid to entities in Dubai; and
When these funds are located, the NPA should arrange to have these funds frozen and repatriated to South Africa.
So far, enforcement action has been confined primarily to forfeiture orders issued by the SA Reserve Bank. These forfeiture orders are unlikely to have a deterrent effect as they are merely seen as a cost of doing business.
Holden’s three reports to the commission provide ample basis for the NPA to investigate and prosecute a wide range of individuals for criminal money laundering activities.