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SARS targets Sasfin over dealings with alleged ‘Gold Mafia’ clients

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The South African Revenue Service (Sars) has a R4.87 billion target on Sasfin Bank’s back. This week it issued summons against the bank for two damages claims of R1.97 billion and R2.9 billion, arguing that several of its clients were assisted by bank staff in unlawfully shipping billions of rands offshore.

Sasfin responded on Tuesday, saying the claims had no merit and would be defended. Sasfin CEO Michael Sassoon says, “it is unjust for banks to be held liable to Sars for taxes that their clients have failed to pay”.

Sasfin’s share price dropped 10% on news of the summons on Tuesday.

The issue is not about Sasfin’s taxes, but rather those of some of its clients.

In a statement, Sars says it “conducted a thorough investigation into various South African taxpayers [the named Sasfin clients] who had not made true and accurate tax disclosures to Sars”.

“The investigation revealed that the taxpayers had colluded to expatriate funds offshore in a manner that obscured tracing the expatriated payments and jeopardises the recovery of tax in South Africa.”

Al Jazeera exposé

Though not mentioned by Sars in its summons or Sasfin in its press response, this is clearly linked to the four-part Al Jazeera Gold Mafia documentary aired in 2023.

In the documentary, a now-dismissed Sasfin employee, Hussain Choonara, named as the back office manager, was alleged to have moved money on behalf of a syndicate so that no red flags were raised with regulators. For this he is claimed to have received a monthly stipend of $1 600.

Other employees named in the Sars summons are:

  • Brendan Marshall, head of the trading desk;
  • Lulama Kene, an “application specialist”; and
  • Cheryl Simons, financial surveillance compliance officer.

Sars says the ultimate responsibility lies with the executives and directors of the bank, who have a “non-delegable obligation to ensure compliance with the relevant legislation when transfers are made to persons outside the borders of SA”.

Sasfin investigation, action

A source close to the case said Sasfin investigated the matter when the documentary aired and found 11 staff involved in the syndicate.

All have since been fired and it is understood that criminal complaints have been lodged against them.

“Sars’ claim relates to the expatriation of money going back to 2014, in which a criminal syndicate colluded with former employees of Sasfin Bank who were operating outside of their scope and authority of employment,” says Sasfin in a statement.

“As soon as Sasfin became aware of the collusion, it took decisive action and instituted an independent investigation which resulted in the termination of relationships with implicated clients and employees and the opening of criminal cases against them.”

Sars documents

In the first claim, Sars provides a list of 18 clients who deposited a combined R5.3 billion into their Sasfin accounts but failed to declare these funds as part of their income tax and value-added tax (Vat) returns.

“As and when the deposits were made, Sasfin directly or indirectly assisted the taxpayers to export undeclared funds unlawfully out of South Africa …” reads the summons.

One of the companies cited, Ocean Twelve General Trading, deposited R1.97 billion into its Sasfin account between February 2013 and August 2014.

Among the other companies cited are African Oak Trading, Chair Boyz and FA Airtime Sales.

All but four of the companies cited are in the process of being deregistered with the Companies and Intellectual Properties Commission (CIPC).

Gold Leaf Tobacco

The second claim against the bank for R2.9 billion relates to Gold Leaf Tobacco Corporation (GLTC), run by Zimbabwean billionaire and cigarette magnate Simon Rudland, who was accused by Al Jazeera of being the ring leader of a gold smuggling and money laundering operation.

Rudland denied these allegations when contacted by Moneyweb last year, saying the accusations against him were false and “are made without any proof”.

“The documentary is extremely sensational and injurious to my good name,” Rudland told Moneyweb.

The Sars summons says GLTC deposited R2.9 billion into its Sasfin rand bank account but did not declare this as taxable income for the 2017 and 2018 tax years.

To transfer these funds abroad, the bank clients cited in the summons had to provide Sasfin with incomplete documentary evidence or fraudulent supporting documents.

Sasfin is claimed to have directly or indirectly assisted the named clients in transferring funds abroad in one of several ways:

  • By processing foreign payment transactions without any – or with incomplete – supporting documentation;
  • By concealing transactions from Sars and the South African Reserve Bank (Sarb) by deleting the transactions in question “not only from the taxpayers’ and GLTC’s bank statements, but also from Sasfin’s Balance of Payment Customer (Bopcus) report” which banks are required to file daily with Sarb;
  • Sasfin is also claimed to have failed to report the foreign payment transactions in its Bopcus reports or any other mandatory reports required of banks.

“Sasfin was at all relevant stages aware, alternatively ought to have been aware, of the taxpayers’ and GLTC’s conduct and that the export of the funds abroad was wrongful and unlawful,” says the summons.

Flagged and investigated

Sasfin’s high risk committee flagged GLTC as a potential risk client in September 2016, but only got around to conducting an internal investigation a year later, zeroing in on 10 suspicious transactions after GLTC had requested a credit line.

The investigation, completed in 2017, confirmed that at least one and possibly all of the 10 suspicious transactions were fictitious, fraudulent or based on incorrect documentation.

In 2022, Sars won a preservation order against Gold Leaf Tobacco and its directors Simon Rudland and Ebrahim Adamjee after allegations that the company was running two sets of books.

The majority of sales were allegedly off-books. Gold Leaf denied the allegations, saying it had always conducted its affairs with Sars in complete transparency and was a major taxpayer in the SA fiscus. The company said it would defend the preservation order, which had been based on “falsely crafted information” by Sars.

Rudland was the target of a failed assassination attempt in 2019 while he was driving into the offices of the Fair-Trade Independent Tobacco Association (Fita) in Norwood, Johannesburg.

In its summons against Sasfin this week, Sars says due to the fact that most of the named taxpayers are being deregistered by the CIPC, and with the funds no longer being in SA, it will not be able to recover the undeclared funds from the companies.

It is holding Sasfin responsible for these amounts as a result of its “breach of legal duty”.

Why no arrests?

Tax Justice SA founder Yusuf Abramjee says Sars’s “action and the recent announcement that it has made tax assessments of more than R10 billion against key players in the tobacco and gold industries are to be applauded”.

“However, they beg the question as to why we still have not seen a single arrest of the kingpins who’ve been looting our country, while at least one of the alleged ringleaders is living a life of luxury in Dubai.

“It’s almost a year since Al Jazeera lifted the lid on how Gold Leaf’s operatives allegedly corrupted bank officials to set up a massive transnational laundry to wash the billions it makes from illicit cigarette sales,” says Abramjee.

“Yet despite SARS issuing a civil claim linked to their operations, the company is still conducting a business like normal in our country and no criminal action has been taken against those allegedly involved in the mass-scale looting.”

Tough legal battle ahead

Sasfin has whistled up some of the top legal guns in the country to defend the claims. The bank says it engaged with the relevant regulators in a transparent manner and obtained a legal opinion from ENS, authored by Professor Dale Hutchinson, Professor Michael Katz and Aslam Moosajee, and endorsed by Advocate Wim Trengove SC.

“The legal opinion is unequivocal that the claim falls outside of the recognised parameters of applicable law and has a very remote likelihood of success,” says the bank.

A tax lawyer contacted by Moneyweb believes Sars has a tough fight ahead of it.

Its first problem in a delictual damages claim is to prove Sasfin’s actions were wrongful, intentional or negligent, and that there was a causal connection between it and the harm suffered.

That will be hard for Sars to prove.

The real cause of the harm to Sars was the companies trying to hide revenue from it and the Sarb. Courts will likely take the view that Sasfin operated lawfully unless proved otherwise.

Moneyweb reached out to GLTC’s legal representative for comment but had not received a response by the time of publication.