Sources have told international news agency Bloomberg that a Mumbai-based lender has started closing bank accounts of companies controlled by the Gupta family. The Gupta brothers are at the centre of allegations of state capture and widespread financial irregularity involving President Jacob Zuma and his family and associates. The move by Bank of Baroda follows similar steps by South African banks and the Bank of China. Commercial banks are expected to serve as a de facto policing agency on money laundering – the moving of funds acquired illicitly through bank accounts to facilitate their use in the formal economy. They run the risk of hefty penalties for facilitating money laundering. Standard Bank has been embroiled in a legal battle for refusing to do business with the Guptas. The irregular relationship between the Gupta family and Zuma has been highlighted in a series of scandals. These range from allegations that the Guptas have directly approached politicians with offers of senior jobs in exchange for working in Gupta interests to the recent appointment of Brian Molefe, linked to the Gupta family with whom he has been in regular telephonic contact, as an MP. Molefe is the laughing stock of South Africa for claiming he visited a Saxonwold shebeen and not the Gupta family compound in leafy Saxonwold. He is thought to be the frontrunner for the job as South Africa’s next finance minister, with incumbent Pravin Gordhan holding tightly onto the keys of the nation’s coffers. The decision by the Bank of Baroda will no doubt anger the Gupta family and spark additional claims of unfair victimisation by monopoly capital and vested interests. The Guptas might have friends in high places in South Africa, but they are starting to look lonely in the private sector. – Jackie Cameron
By Sam Mkokeli, Renee Bonorchis and Anto Antony
Bloomberg – Bank of Baroda’s South African unit has started closing accounts of companies controlled by the Gupta family, according to three people familiar with the matter, potentially leaving the friends of President Jacob Zuma without banking facilities in the country.
The Mumbai-based lender is winding down its relationship with companies related to the Gupta family to ensure it is in compliance with banking rules, the people said, asking not to be identified because the matter is confidential. The Guptas, who are in business with Zuma’s son, have been accused by opposition parties and some ruling party officials of using their friendship with the president to influence cabinet appointments and government contracts. They have denied the allegations.
Oakbay Investments, the Gupta’s main holding company, said it isn’t aware that Baroda will close its accounts.
“Oakbay is not aware of any such information,” the company said in an emailed response to questions. “I can only imagine that your source has their own agenda, and wants to put pressure on Bank of Baroda.”
South Africa’s four biggest banks last year closed accounts linked to the Gupta family, giving them more than a month’s notice and citing the need to comply with international banking rules when dealing with customers and concern over their reputations. The family, led by brothers Atul, Ajay and Rajesh, asked Finance Minister Pravin Gordhan to stop the banks terminating the accounts, spurring Gordhan to seek a court order stating that he can’t prevent lenders from cutting clients.
Gordhan’s court application in October included a document from South Africa’s Financial Intelligence Center listing 72 reports of suspicious transactions totaling 6.8 billion rand ($520 million) that implicated members of the Gupta family and their companies. The family has asked the court to dismiss Gordhan’s application, while their lawyer has said that none of the transactions were dubious.
A Mumbai-based spokesman for the Bank of Baroda didn’t immediately respond to an email and two calls to his office phone.
“We’ve not received any notice in this regard and can only investigate where this is coming from,” Gert van der Merwe, the Guptas’ lawyer, said by text message on Thursday about the Bank of Baroda closing accounts linked to the family.
Bank of China Ltd.’s South African branch dropped the Guptas as clients in September, according to court documents filed by the family in January. The country’s anti-graft ombudsman in November called for a judicial inquiry into the allegations against the Gupta family.
Salim Essa, a director of a company part owned by the Gupta’s Oakbay Investments Ltd., and Hamza Farooqui have bid to buy all of Habib Bank Ltd.’s South African assets. At the beginning of February South Africa’s central bank recommended rejecting the bid for the Pakistan-based lender because of concerns about the source of the two businessmen’s income and tax declarations, government officials with knowledge of the matter said at the time.
Political pressure on South Africa’s banks has since intensified with Zuma saying on Feb. 10 the dominance of the country’s four major banks must end. The racial makeup of the banks’ leaders has also made the industry a target for politicians. Of the five biggest lenders, which together control about 90 percent of the local banking market, only Standard Bank has a black co-chief executive officer.