Keeping the Guptas banked was too 'risky' for FirstRand

04 December 2016 - 12:37 By Sabelo Skiti

FirstRand has revealed for the first time that the Guptas' bank accounts were closed over suspicions that they were used to launder money.

FirstRand CEO Johan Burger made the revelation in an affidavit filed to the High Court in Pretoria. It was filed in response to Finance Minister Pravin Gordhan's application for the court to declare that the government had no authority to intervene in the decision by four major banks - Standard Bank, FNB, Absa and Nedbank - to terminate their business relationships with the Guptas.

FirstRand is the first bank to file a supplementary affadavit, with the rest considering whether to follow suit.

Gordhan filed his application in October, in which he said 72 dubious transactions totalling R6.8-billion made by the Gupta family and their companies had been uncovered. The banks had alerted the Financial Intelligence Centre to the transactions.

The finance minister said in his legal papers that he had come under sustained pressure from the family to intervene in the matter, despite sharing with its members two legal opinions which advised him against intervening.

Burger, in the 14-page affidavit, said the bank sought to comply with international best practices and standards as expected by the Reserve Bank. Complying, he said, was critical for the integrity of the banking sector.

"These practices and standards require us to take steps to prevent FirstRand being used for money laundering or other unlawful activities," he said.

"Apart from FirstRand's obligations in terms of South African legislation including, but not limited to, Fica [the Financial Intelligence Centre Act] and the Banks Act, FirstRand also has to bear in mind international legislation such as the UK's Bribery Act and the US's Foreign Corrupt [Practices] Act, by virtue of FirstRand's transactions and counterparty relationship not being limited to South Africa."

Burger did not cite examples or specific transactions, but said FirstRand had terminated its services because of "associated reputational and business risks".

The bank supported Gordhan because a court order would encourage public officials to act according to the law, he said.

The Guptas approached several cabinet ministers and President Jacob Zuma to intervene after the four major banks closed the family's and their businesses' accounts in April.

Burger revealed how he turned down repeated requests for a meeting from the cabinet's inter-ministerial committee headed by Mineral Resources Minister Mosebenzi Zwane.

Burger said the committee's unwillingness to share who would attend the meeting and what allegations had been made against FNB were part of the reason he snubbed the request to meet.

Gert van der Merwe, the Guptas' attorney, said on Friday he was not surprised the banks supported Gordhan's application.

"It's not coincidental because the application ... will protect the banks from [an] inquiry," he said.

"What is funny for me is the fact that they don't come forward with these reasons [for the account closures]. To continue with the innuendo is becoming a little boring for me."

Zwane's eagerness to act on behalf of the Gupta family saw him thrust into a political storm after he issued a statement on behalf of the cabinet saying it would request Zuma to establish a judicial commission of inquiry into the banks' actions.

The Presidency distanced itself and the cabinet from the statement, saying Zwane had acted "in his personal capacity". Zuma recently announced that he had verbally reprimanded Zwane.

But during his last Q&A session in parliament last week, Zuma came to the Guptas' defence, labelling the closure of their bank accounts as suspicious. He also said he was considering Zwane's recommendation for an inquiry.

The Presidency did not respond to requests for comment last week to clarify Zuma's utterances in the National Assembly.