Appel and Erin on Estina Laundromat: Complicity of banks

In the latest episode of the Appel and Erin Show, the infamous Gupta-linked and corruption-riddled Estina dairy project in the sleepy town of Vrede is in focus. BizNews deputy editor Michael Appel and Advocate Erin Richards discuss how R280m in taxpayer money – paid to the Gupta entity in eight tranches – made its way through our financial system. According to the State Capture Inquiry, some 82% of the funds paid to Estina by the Free State Agriculture Department was laundered into Gupta shell companies. The funds were paid to Estina’s FNB and Standard Bank accounts by the Free State government between 2012 and 2016. – Michael Appel

Advocate Erin Richards on the background of the Estina Project

Back in June 2012, there was an agreement signed between Estina and the Free State government, in terms of which Estina was supposed to deliver an integrated dairy project. I’m not exactly sure what that is. And in essence, it turned out to be nothing more than a money-laundering scheme of the R280m that was paid by the Free State government to Estina; 82% of that was laundered and used for the benefit of the Guptas.

Richards on how R280m was moved offshore

[Money could not have been moved] without the complicity of the banks. I mean, there were so many red flags in this project over the period of four years from 2012 to 2016, which is when that money was laundered. But, let’s just look at how the money was actually laundered first. The Free State government would pay these tranches of money of between R19m to R60m into Estina’s bank accounts. Those accounts were held with FNB and with Standard Bank. So, first, the money would go to those accounts. From there, it was extensively laundered either through loan banks or through roundtripping. 

On when red flags should’ve been raised 

The R280m was paid in eight tranches. Six of those, to the best of my knowledge, went to Standard Bank, and the other two to FNB. So, Standard Bank seems to be in a bit of hot water here because what happens is these funds land up in the Standard Bank accounts and only two of the six payments were left in the Standard Bank account for more than a week. All the others were paid out of the account within the space of one week. Now, that is a massive red flag when you’ve got amounts like R20m, R30m being paid into this account only to be paid out immediately afterwards … usually to an external beneficiary or to a company in Dubai. That’s a huge red flag, especially when that company had only R16,98 in the account before that. 

If it was a legitimate operating entity, surely it would want liquid funds in the account. So, that is the first red flag that should have caught attention. And then, of course, there is the issue about the media. The media first raised this in April/May 2013. Shortly after, amaBhungane is all over it. Early the next year, you see the Treasury launching an investigation into this. Why were those accounts not flagged, reviewed, suspended or closed during that period? Instead, all of these payments were allowed to continue up until 2016. Well, those are two obvious flags that were missed. 

Whether the banks were sufficiently interrogated about money-laundering allegations

You mean at the Zondo Commission? No, I don’t think so. I mean, we must be cognisant of the fact that this was a massive undertaking. Obviously, the commission didn’t have time to probe everything. But one would think that when you are dealing with state capture, one of the first places you look to is the banks. You want to follow the money. You want to understand what happened in the system to prevent it happening in future. You are never going to get to the bottom of state capture without the assistance of the banks. And that is why I found the way the banks were handled with kid gloves unacceptable. 

The banks seem to have been brought in on a very narrow political question of political interference in the closure of the Gupta bank accounts. The questioning didn’t really go beyond that. I believe it is very important to ask why and I’m a bit frustrated this hasn’t been washed out in the media. I would have thought that this is a question someone would have asked: why were the banks let off the hook when there are so many inexplicable transactions that were allowed to go through the system?  

On the lack of interrogation around the banking system

This issue goes further than the Zondo Commission. I mean, the Zondo Commission is not the only body that could have interrogated this. We have the Financial Intelligence Centre, which has massive investigative powers. Why isn’t it investigating … or is it? Why aren’t the journalists asking questions? Why isn’t the Prudential Authority, which is housed under the Reserve Bank, investigating this? There seems to be a strange silence around the banks; as though there may be an agreement to protect the banks from interrogation. And I would wonder why, if this is the case. At the moment, unfortunately, there are more questions than answers.

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