The judicial commission of inquiry into state capture — chaired by Deputy Chief Justice Raymond Zondo — reconvenes on Monday, with representatives of banks expected to give evidence regarding their closure of Gupta bank accounts.
In 2016, Absa, FNB, Nedbank and Sasfin unexpectedly cut ties with Gupta-owned businesses and shut down their bank accounts. The move to close the bank accounts came amid allegations that the Gupta family had improper influence over then president Jacob Zuma.
At the time the Gupta family owned Oakbay Investments, the holding company for a range of interests including listed Oakbay Resources and Energy, as well as The New Age newspaper and broadcaster ANN7.
After both Absa and FNB terminated banking relations with Oakbay and its related entities, the company said it has been unable to secure any further banking services and it may not be able to pay its staff salaries.
The Banking Association of South Africa said in a statement at the time that each bank took the decision separately.
The industry is one of the most highly regulated sectors and must comply with various anti-money laundering and other regulations under the Financial Intelligence Centre Act (Fica).“These regulations make it incumbent on banks to conduct a detailed due diligence on clients, particularly those of a substantive nature and those that are in the public domain,” the statement said.
“Such due diligence is conducted on an ongoing basis to ensure the bank is aware of any significant changes in the affairs of the client, particularly to satisfy itself that a client is abiding by Fica regulations and anti-money laundering regulations.”
The banks cited the need to comply with international banking rules when dealing with customers and concern over their reputations. Members of Zuma’s Cabinet were asked to intervene, with the former president calling the banks’ actions suspicious and saying their action could point to collusion.
Then finance minister Pravin Gordhan was asked to stop the banks terminating the accounts, spurring Gordhan to seek a court order stating that he cannot prevent lenders from cutting clients.
Gordhan’s court application included a document from the Financial Intelligence Centre listing 72 reports of suspicious transactions totaling R6.8-billion that implicated members of the Gupta family and their companies.
These sections of Gordhan’s court papers were ultimately struck from the record.
Also struck from Gordhan’s papers is the affidavit by then deputy finance minister Mcebisi Jonas, describing how Ajay Gupta allegedly tried to bribe him by offering him the job of former finance minister Nhlanhla Nene. In August, the Zondo commission heard Jonas’ testimony regarding this encounter.The high court also struck the Guptas’ accusation that Gordhan and the banks conspired and colluded against the family and their businesses.
In August 2017 Gordhan’s application was dismissed. But the court did not conversely find that the finance minister does have the power to intervene in such a matter, saying that it was not necessary to make a declaratory order on a law that already exists. By then Gordhan had already been relegated to an ANC backbencher in Parliament.
The Bank of Baroda’s South African unit, the Gupta family’s last banking standing in the country, soon also started closing the accounts of Gupta-owned companies. Oakbay approached the Pretoria High Court to interdict the bank from doing so, but its application was dismissed by Judge Hans Fabricius.
There was a “well-founded suspicion”, on uncontested facts, that Gupta-linked companies had “subverted the integrity of the financial system, to put it gently”, Fabricius said in his judgment on the matter.
Baroda had been central to various Gupta business coups in South Africa for years, making available billions of rand in loans for major acquisitions.
Former public protector Thuli Madonsela said in her 2016 State of Capture report that Baroda’s involvement, particularly in the purchase of Optimum Coal and the handling of a ring-fenced rehabilitation fund, requires further investigation.
Baroda was locked into maintaining its relationship with the Guptas, after the family’s companies were successful in securing a temporary interdict against the closure of their accounts. The bank chose to suspend its South African operations in 2018.
Though the Gupta-owned companies attempted to force the bank to stay in the country, in March the high court in Pretoria dismissed their application to do so.