Gupta-linked entities’ ‘suspicious transactions worried Standard Bank’

Standard Bank’s retired head of legal, Ian Sinton, told the Commission of Inquiry into State Capture on Tuesday about suspicious transactions and money flows between Transnet, McKinsey and Regiments Capital, which led the bank to terminate its relationship with the two latter firms.

McKinsey and Regiments had a contractual relationship and did consultancy work for Transnet.

McKinsey provided consultancy services to the bank while Regiments held a transactional account with the bank, Sinton told the commission.

Sinton was subpoenaed to appear before the commission to identify the various Gupta-linked entities between which suspicious movements of money had occurred.

Sinton says the bank relied on FIC act, PRECAA and POCA act to monitor activities that appears to be suspicious on accounts of its clients. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 12, 2019

Domestic and international laws and regulations, which include the Financial Intelligence Centre Act and the Preventing and Combating of Corrupt Activities Act, among others, obligate the bank to flag and investigate suspicious transactions which, if found to be in breach of the law, should be reported to law enforcement agencies.

Sinton say if a client's account seems to have suspicious movements, the bank would investigate and report to the financial Intelligence Centre (FIC). #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 12, 2019

Testifying before the commission last year, Sinton said the bank took the decision to close the bank accounts of the Guptas and entities linked to the controversial family alleged to be at the centre of state capture for a number of reasons, which include reputational risk.

READ MORE: Media reports the main reason Standard Bank kicked Guptas to the kerb

Sinton said on Tuesday that in the second half of 2015, the bank noticed well-publicised reports concerning the Guptas, which included the family’s controversial landing at the Waterkloof military base, Absa having terminated all dealings with the Guptas and entities associated to the family, and KPMG’s withdrawal of auditing services from these entities.

Sinton said these were all red flags for the bank, which then set out to determine which Gupta-linked entities it dealt with. The bank used internal and external investigative resources to gather information to make its own assessment to determine whether or not to continue the relationship with the Guptas and their associated entities.

Sinton told the commission that Optimum coal mine, while under the ownership of Glencore before Gupta-owned Tegeta took over, had a transactional account with the bank and that Glencore had set up a trust account with the bank on behalf of the mine.

Sinton says Optimum coal mine had transaction accounts with Standard bank. He says there was a trust account for Glencore. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 12, 2019

Shortly after the change of ownership of the mine from Glencore to Tegeta, a representative from the Guptas’ Oakbay – Tegeta’s controlling company – contacted the bank to enquire whether it would continue to provide services to the mine in light of the fact that the institution had terminated its relationship with Gupta-linked entities, Sinton said.

Sinton says shortly after the change of hands of Optimum mine, they received email from Oakbay to asking if the rehabilitation funds for the coal could be transferred to Oakbay. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 12, 2019

At a later stage, Oakbay, through Ronica Ragavan, instructed the bank to transfer the mine’s trust funds to an Oakbay account. This request was rejected, with the bank stating that the trustees and the minister of mineral resources would have to approve this transaction, Sinton said.

Sinton says the bank received an email from Oakbay requesting the bank to transfer the trust account to the Bank of Baroda. The bank refused and sought permission from the Minister of Minerals and Resources at the time and he gave permission. #StateCaptureInquiry

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— State Capture Commission (@StateCaptureCom) March 12, 2019

A few days later the trustees were changed and the newly appointed trustees then requested the bank to transfer the trust funds to the Bank of Baroda, Sinton said.

Sinton said the Trust Account at the time had R1.7 million. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 12, 2019

Again, the bank resisted, this time citing that the minister’s approval was required which, Sinton said, was forthcoming in due course.

Within a few days, the bank terminated its relationship with Optimum coal mine as a result of the change in ownership from Glencore to Tegeta.

Media reports on the relationship between Regiments and McKinsey were also a concern for the bank.

Sinton says Mckinsey was providing management consultancy services to Standard Bank. Reading from an article in the media detailing the relationship between Regiments, Mckinsey, Trillian and their dealings at Transnet and Eskom. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 12, 2019

McKinsey and Regiments scored contracts at Transnet.

The bank requested a meeting with senior management at McKinsey, which included the firm’s head of risk. At the meeting, the bank expressed its concerns about the firm’s dealings at Transnet and Eskom.

Sinton says the bank had a meeting with Mckinsey and they undertook to get the bank with full report on their dealings with the state entities. He says the Mckinsey never came back, the bank decided to terminate it dealing with the company. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 12, 2019

Representatives from McKinsey were surprised by these revelations and made use of the services of local and international lawyers to probe the matter, assuring the bank that it would share with it its findings.

McKinsey later informed the bank that through its investigation it found that there was “reckless behaviour and bad mistakes” which were made but no wrongdoing, as media reports had suggested.

“Shortly after they commenced with their own investigation, we took the decision to terminate all dealings with McKinsey,” Sinton told the commission.

Sinton told the commission that Transnet would credit Regiments with a large amount, which would in turn credit the accounts of Shivita Pty Ltd and Homix, payments which he thought needed to be explained.

Sinton says from time to time there would be a large amount of money transferred into the account of Regiments seemingly from Transnet, before going out. He says usually an amount of R2 million would then transferred to directors of Regiments.#StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 12, 2019

Salim Essa, believed to be an associate of the Gupta family, had nominated Shivita and Homix to receive payments from Regiments, which were his fees for ensuring that the company bagged a contract with Transnet.

Sinton says he felt the large payments to entities like Homix and Shivita trading needed to be explained. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 12, 2019

A month-long bank statement for February 2014 which was tabled before the commission shows transfers of various monies into and going out of the Regiments’ bank account.

Maleka goes through the statement of Regiment, at page 12 an amount of R117 000 was paid to Mohamed Bobat. R5 million was paid to SARS, Group-serve(Transnet) then paid R45 million into the account. R5 million and R1 million were then paid to Shivita trading. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 12, 2019

Maleka says in a period of two days Shivita received payments to a total of R40 million. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 12, 2019

Sinton says around May a company called Albertine was paid R1 million. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 12, 2019

Maleka says for July alone Homex was paid around R22 million. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 12, 2019

Sinton says in august, Transnet made a payment of R22 million into Regiment account, Homix was then paid R25 million. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 12, 2019

Sinton says the bank wrote a letter to Regiments directors to explain the transactions. The meeting took place in October 2017. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 12, 2019

Sinton says the bank was told Regiments was appointed as sub-contractor to the work done to Transnet and benefited 30% of the revenue. Mr Salim Essa would then take 50% of the revenue from Regiments. Essa then nominated Shivita and Homix to get his share. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 12, 2019

Sinton says he did ask why Essa was getting paid and he was told that essa had brought about the whole opportunity to get work at Transnet. #StateCaptureInquiry

— State Capture Commission (@StateCaptureCom) March 12, 2019

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