Cash-in-transit company used to conveniently launder millions, commission hears

Ignorance of the law is no excuse for breaking it.

This was painfully teased out by the testimony of Kalandra Viljoen, director of Asset Movement Financial Services (AMFS), at the Commission of Inquiry into Allegations of State Capture on Monday.

AMFS was a cash-in-transit business, the middleman that enables an entity to make a payment (seemingly a transaction), and receive it back in cash, neatly packed into plastic bags.

Easily transportable, easily dispersed, no trail?

AMFS, now sold and possibly liquidated, handled a lot of cash.

In its heyday in 2016/2017, it could have moved as much as half a billion cash a day. Viljoen was at times a bit sketchy on the details; she couldn’t remember exactly when the peak was.

It must be hard to distinguish between R300 million and R500 million cash?

AMFS business model

A client would phone Viljoen and inform her that they needed cash, and would then deposit the money in AMFS’s bank account. Clients didn’t always use reference numbers on bank deposits, and confirmation was made telephonically. She could receive up to a 100 calls a day.

Viljoen would then transfer the funds to SBV Services (a traditional cash-in-transit business), which would pack the cash into clear plastic bags. Her drivers would collect the cash from SBV and deliver it to the client.

And why did clients use her services? Because she delivered the cash in unmarked vehicles.

She vetted the source of deposits into AMFS’s bank account by phoning the client to check if they had deposited it. She was under the impression that it was the bank’s responsibility to check the origin of electronic deposits.

Fica

Viljoen was firmly of the view that AMFS would be classified under the Financial Intelligence Centre Act (Fica) as a “money remitter”.

All her clients were Fica’d by her. In her opinion, this required obtaining copies of their IDs, income tax numbers, and physical addresses.

She would visit their premises, and ask about their businesses. She would know that “it all added” up when she “got the feeling inside that it was all okay”. She didn’t take notes. “Vetting” the delivery address was important to ascertain whether it was a security risk for deliveries of cash.

But Viljoen’s idea of vetting fell way short of what is required under the law.

‘Control measures?’

She had no knowledge of the Fica regulatory and legislative requirements – was unaware of the control measures for money laundering, and didn’t know about the measures to be put in place to guard against businesses being used for money laundering.

Viljoen had not kept up to date with the guidance notes issued by Fica, and wasn’t aware that she was legally obliged as an accountable institution to do so. Nor was she aware of “suspicious transaction reporting” (the need to report a transaction or series of transactions that would be likely to facilitate the transfer of the proceeds of unlawful activities).

She never made a suspicious transactions report. She wasn’t aware that she had to carry out ongoing due diligence on her clients.

Viljoen was not aware of the requirement that every financial institution develop a risk management and compliance programme, and had not developed one.

Viljoen did not understand how one would go about verifying the source of funds, and had entered into business relationships with clients not having carried out all the steps required by Fica (verify the identity of the client/relevant person, verify the source of funds, conduct ongoing due diligence).

Viljoen was not aware of the obligation to keep records of due diligence and all transaction records, nor the requirement that records be kept for five years.

The Hawks

Viljoen was contacted by the Directorate for Priority Crime Investigation, otherwise known as the Hawks, in March 2018 in respect of Koroneka Trading and Projects. They later met at a restaurant.

Koroneka has been implicated in suspect payments involving the North West government.

Viljoen realised that this had something to do with controversial businessman George Markides.

Before the meeting with the Hawks she contacted Markides’s PA to obtain copies of the receipts (proof that the funds were delivered). Viljoen’s own copies were possibly lost during a previous heist.

However, Viljoen did not establish the authenticity of the delivery notes from Markides before she handed them over to the Hawks, but when she handed them over she saw that they were not her delivery notes. It appeared they were Markides’s on-delivery notes.

This changed everything, as Viljoen then assumed that these funds were not used for his business but went on to someone else.

She was not unduly perturbed by this.

Koroneka transactions

The transactions related to Koroneka comprised three deposits made in 2015 amounting to R9 million. The deposits were referenced “Koroneka”, but Viljoen assumed that Koroneka was used for Markides’s own referencing purposes. Viljoen is not in possession of delivery slips, but confirmed that the funds were delivered to Markides’s place of business.

Viljoen tried to assert that the steps she took to identify her client under Fica were adequate, but on being reminded that she had no way of knowing that another entity was in fact transacting with her, she had to admit that the steps she had taken were not adequate.

Fica includes in its list of unusual businesses a business that receives deposits of funds with a request for their immediate transfer elsewhere. Evidence leader advocate Kate Hofmeyr asked Viljoen if this was not a description of her business.

Viljoen had to agree (somewhat reluctantly).

Hofmeyr described to the commission a run-of-the-mill cash-in-transit business, which doesn’t enter into transactions but simply moves money between its client and the client’s bank. The movement of cash between a retailer and a bank is an example.

Operating the business of a bank

Under the Banks Act, businesses identified as “money remitters” would only include banks and foreign exchange services. Any business that receives money from the public – and pays it back to them over time – is operating the business of a bank, and should be registered as such.

Homeyr put it to Viljoen that if AMFS was operating as a bank, it would have to have been registered as a bank. “Were you aware of this?” Viljoen said no.

Hofmeyr declared that any entity receiving deposits, and ensuring that they are repaid subject to the terms agreed between the entities, would have to be registered as a bank.

Conducting the services of a bank without being registered as a bank is a criminal offence. It may also result that all of the proceeds obtained may have to be paid back. Viljoen was not aware of these provisions.

Eyes wide shut

Hofmeyr further pointed out that Viljoen now knows that she was misled by Markides and that the amount of R9 million deposited with AMFS came from him. Viljoen has subsequently established that these funds came from Koroneka Trading and Projects CC.

Hofmeyr referred to a flow-of-funds diagram that had been prepared by the commission, showing the movement of funds from the North West government to SA Express and then to Koroneka, or from North West directly to Koroneka, and from there how the funds had been dispersed to various entities, including the R9 million payment from Koroneka to AMFS.

Viljoen has given evidence that the funds were received from Koroneka, then converted into cash and delivered to Markides.

Viljoen had never vetted Koroneka as a client. Nonetheless, she took her fee from the R9 million, and delivered the rest to Markides.

Blissfully ignorant, seemingly innocent, eyes wide shut, Viljoen thanked the commission for their time.

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