Banks have up to ‘40% less due-diligence’ for the wealthy

JOHANNESBURG — If you’ve ever wondered how dodgy individuals, like the Guptas, seem to get away with so much in our world, it may be worth taking a look at the latest report on banking from an organisation called Open Secrets. In a quite astounding revelation, a journalist who is quoted in the report from Open Secrets has said that her “investigations have revealed due diligence performed by banks was reduced by 40% for high nett worth individuals or companies.” That’s quite the eye-popping number – clearly, with wealth, comes great power (and possibly invisibility). This below article first appeared in the Daily Maverick. – Gareth van Zyl

By Steve Kretzmann

This shady world of banking and the way they allow themselves to be used by nefarious organisations and individuals in order to turn profit, without being subject to any customary international law or binding treaty, is detailed in a new report on corporate corruption by Open Secrets.

The Bankers: Corporations and Economic Crime Report was launched on Wednesday night at Community House in Salt River. The hard-hitting 57-page volume takes the struggle for justice forward through a focus on an international corporate system designed to extract wealth from the poor and middle class in service of profits.

At the launch, the theme was clear: Banks serve the wealthy through illicit offshore flows, aiding and abetting corrupt regimes guilty of gross human rights abuses, quietly assisting State Capture, or debiting the accounts of the poorest of the poor for services they never use.

This includes claiming to be victims of fraud and pointing the finger at whoever or whatever is closest when confronted with their complicity even as they raise no objection to making massive profits off the pain of entire populations.

As an example of how a bank will skirt the law for high-nett-worth individuals or big companies while putting small customers through excessive layers of bureaucratic checks, investigative reporter at the Organised Crime and Corruption Reporting Project, Khadija Sharife, spoke at the launch of how a bank assisted bypassing the laws of the UAE in order to open what was a fake business in Dubai, using someone else’s ID.

Sharife, who is among a number of investigative journalists whose work is referenced in The Bankers, said even though UAE law stipulates anyone registering a business in the country has to physically be there to do it, the bank actively assisted her in bypassing it as they believed she was representing a wealthy Chinese company. The name of the bank cannot be revealed as it would jeopardise the story on the illegal Madagascan Rosewood trade.

She said investigations have revealed due diligence performed by banks was reduced by 40% for high nett worth individuals or companies, while those they deemed of less value had to use what little time and money they had jumping through hoops.

Editor of The Bankers, Michael Marchant, said Open Secrets chose to focus on the banks in the first of what promises to be a series of reports, because they were increasingly becoming “essential to illicit activity”, including global organised crime, which relies on a banking system that asks few questions.

Despite claiming to be innocent victims, banks were key facilitators of the Gupta network’s attempt to wrestle economic control of South Africa from the hands of its elected officials, said Marchant.

If the banks had conduced due diligence back in 2012 and asked questions about what the Gupta’s bank accounts would be used for, their state capture project may not have got off the ground.

Read also: Why did Absa take so long to close Gupta bank accounts? Ramos calls in the lawyers

This is not to say other actors, such as politicians and other businesses were not involved, said Marchant, but Open Secrets sought to counter the narrative in which the banks claim innocence.

The report’s introduction also argues that “corporations engage in this kind of myth-making within a domestic and international legal framework that has many gaps in its ability to hold corporations accountable”. Politicians come and go and can get voted out, but the corporate systems which enable corruption through whoever holds office next, remain.

Read also: Peter Hain’s “smoking gun” – provides bank accounts detailing how Guptas took billions from SA

“Bankers, auditors, lawyers and management consultants were fundamental in facilitating illicit activity by the Gupta network of companies, and in the undermining of governance in the public sector,” states the introduction further. “They were not incidental actors and they profited from the roles they played.”

But the Guptas, aided by Nedbank and Bank of Baroda, are certainly not the be-all and end-all of corporate corruption.

The Bankers looks at the role local and international banks played in supporting the apartheid regime and breaking the arms embargo, as detailed by Open Secrets director Hennie van Vuuren in his book Apartheid Guns and Moneyas well as case studies of VBS, the role of Grindrod Bank in the Cash Paymaster Services fleecing of social grant beneficiaries under social development minister Bathabile Dlamini, and the role of auditing firms in assisting the illicit financial flow of at least R750 billion out of Africa every year.

Read also: NPA unveils more evidence Bank of Baroda helped Atul Gupta grab taxpayers’ money

These case studies reveal that the money involved are not just figures on a corporate balance sheet, or even someone else’s money. Due to the legal ramifications of limited liability, it is the money of the poorest citizens, as well as taxpayers’ money, the benefits of which are whisked away to enrich those who already have more wealth they could spend in a lifetime. It is also our safety, as the thousands of jobs not created through redirection of finances back into the economy leads to continuing high levels of unemployment and widening inequality which further destabilises society.

Until or unless the heads of private institutions are forced to account for their crimes, are tried and put in jail, they will continue to act with impunity, says Marchant.

But with a lack of political will to bring them to book, the responsibility will fall to civil society, as so much else has.

It’ll be an arduous battle, but The Bankers is a shot across the bows, and the corporations who have sailed for so long on seas smoothed by politicians, are firmly in the sights of civil society. Van Vuuren says they are considering launching civil action against Kredietbank Belgium and its subsidiary, Kredietbank Luxembourg for their role in breaking the apartheid arms embargo by laundering money for Armscor under the old National Party regime. DM