Sophisticated money laundering networks existed in South Africa earlier than the Guptas, the Zondo Commission has revealed in Part VI Vol III of the Zondo Report.
These networks had been already plugged into worldwide money laundering networks together with in Hong Kong and China, “and they served a wide range of clients other than the Gupta Enterprise”.
The money laundering networks utilized by the Guptas and different prison enterprises had been “embedded in a pre-existing milieu of criminality and wrongdoing”.
The Zondo Commission retained Paul Holden of Shadow World Investigations to hint the money flows referring to the kickbacks emanating from the large irregular contracts with state-owned entities.
This revealed an unlimited worldwide money laundering community that was accessed by criminals, and to which the South African authorities, by means of ignorance or intent, had been oblivious.
Holden submitted three intensive reviews to the fee, which was restricted to investigating the home money laundering networks, because it didn’t have offshore information-gathering powers.
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The Chinese locomotive corporations that obtained the Transnet locomotive contracts used the money laundering community based mostly in Hong Kong/China to pay the kickback to the Guptas.
China South Rail and China North Rail merged to create the Chinese Railway Rolling Stock Corporation (CRRC).
Gupta enterprises held financial institution accounts at HSBC
CRRC paid kickbacks into HSBC financial institution accounts held by Gupta enterprises in Hong Kong.
Between December 2014 and September 2016 some $145.2 million of kickbacks from the Transnet/CRRC contract was paid into the Hong Kong HSBC accounts.
An inner investigation by HSBC indicated that Regiments Asia, Tequesta and Morningstar, which obtained kickbacks for the Gupta Enterprise, “showed that 92 of the companies receiving payments from these three entities held accounts at HSBC bank”.
Sixty of those accounts had been energetic, had obtained simply over 50 000 funds totalling $4.2 billion, and in flip made onward funds to almost 6 000 beneficiaries. Regiments Asia, Tequesta and Morningstar additionally made funds to 55 of those beneficiaries.
The fee stated that the entire worth of onward funds was R3.78 billion in some 33 000 transactions.
HSBC’s investigation was restricted to solely 60 accounts paid by Regiments Asia, Tequesta and Morningstar, which represents solely a “slither of the entirety of this global money-laundering network” that has laundered billions of {dollars} internationally.
Kickbacks paid inside South Africa
In South Africa, the kickbacks, comprising funds from third-party corporations in return for contracts awarded by state-owned corporations and authorities departments, had been first paid into so-called “first-level” laundry entities.
The Gupta enterprises used “15 known first-level laundry entities”, which in flip fed into 4 separate laundering routes that had been activated chronologically.
Some R1.2 billion in kickbacks was paid into the first-level laundries.
Holden recognized the quite a few names, in addition to the money flows.
“The payments were made into international laundry networks by what Holden calls onshore-offshore bridges” which acted as the ultimate cease of the native money laundering chain.
These bridges paid into a few completely different networks, from the place the funds had been “comingled with an extremely large number of cash payments from mixed sources”.
Some funds had been ultimately made again into Gupta entities or to entities with connections to Gupta entities.
The first-level money laundering community generally known as Chivita obtained R154 million from Regiments, Combined Private Investigations, Zestilor, Homix and Denel.
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Between April 2014 and May 2015, Homix – which was a part of the “second money laundering network” – obtained R395.4 million from state seize proceeds, and transferred R324 million to an organization referred to as Bapu Trading, which made funds to recognized entities. Included within the funds was an quantity paid to Hulley and Associates, which then settled former president Jacob Zuma’s invoice with Advocate Kemp J Kemp, SC.
The third-level money laundering community of Forsure and Hastauf obtained R16.9 million and R12.4 million of state seize proceeds from Regiments. Forsure obtained one other R14.8 million from Albatime and Hastauf one other R17.7 million from Albatime. IPocket Global paid Forsure R11.4 million and Hastauf R14.2 million.
The fourth money laundering community, dubbed by Holden because the “spider’s web”, obtained R314.9 million from state seize contracts.
Entities and people recognized
Holden has recognized all of the entities in addition to the people who obtained funds, and in addition recognized 12 corporations that carried out the perform of onshore-offshore bridges for established money laundering networks inside South Africa.
The first-level money laundering networks paid lots of of tens of millions into the onshore-offshore bridges, all itemised by Holden.
The South African Reserve Bank (Sarb) has additionally recognized numerous onshore-offshore bridges and issued forfeiture orders in respect of funds held be a number of of those entities.
“However, the NPA [National Prosecuting Authority] does not appear to have instituted any money laundering prosecutions arising out [of] the SARB investigations”, in keeping with the Zondo Report.
Griffin Line Trading
It was not attainable to hint funds from inside South Africa to the offshore money laundering networks, besides “where those responsible for laundering these funds became undisciplined” and paid the funds into the offshore Gupta firm Griffin Line Trading, which was registered in Dubai.
“Griffin Line Trading was the ultimate source of R842 million of the purchase price paid by Tegeta for the Optimum Coal Mine.”
An quantity of $200 000 representing the “unlawful proceeds of frauds on Transnet and thefts from the Transnet Second Defined Benefit Fund” had been “laundered into a fixed deposit held by Albatime at the Bank of Baroda” earlier than being “laundered domestically” by means of the Seattle onshore-offshore bridge.
Further funds from this illicit supply had been paid into one other onshore-offshore bridge referred to as Varlozone.
Some R8.8 billion was paid into the Hong Kong/China laundries.
The worldwide networks of SA money laundering networks
SA money laundering networks had networks past the Hong Kong/China laundry corresponding to entities based mostly within the United Arab Emirates (UAE).
These networks allegedly laundered money for worldwide drug cartels and for terrorist teams.
The Sarb additionally has information of moneys paid to the Hong Kong/China laundries.
Commission’s suggestions
If South Africa is to get well any of those funds, it’s going to first should hint the placement:
- The South African authorities ought to have interaction with the HSBC for help in tracing the funds;
- The Financial Intelligence Centre (FIC) and the NPA ought to have interaction with their counterparts in Hong Kong and China to hunt their help in tracing the funds that had been paid into the Hong Kong/China laundry community utilizing HSBC accounts;
- The FIC and the NPA ought to have interaction with their counterparts in Dubai for tracing of funds that had been paid to entities in Dubai; and
- When these funds are situated, the NPA ought to prepare to have these funds frozen and repatriated to South Africa.
So far, enforcement motion towards money laundering networks has been confined primarily to forfeiture orders issued by the Sarb. These forfeiture orders are unlikely to have a deterrent impact as they’re merely seen as a value of doing enterprise.
Holden’s three reviews to the fee present ample foundation for the NPA to research and prosecute a variety of people for prison money laundering actions.
Chief Justice Raymond Zondo really helpful that the effectiveness of the present system of suspicious transaction and money threshold reporting ought to be urgently reviewed.
Read Parts 5 and 6 of the Zondo Report:
Part V Vol I
Part V Vol II
Part VI Vol I
Part VI Vol II
Part VI Vol III
Part VI Vol IV