The Gupta poison forces exit of Bank of Baroda from South Africa

Bank of Baroda, which became embroiled with the Guptas — scandal-ridden businessmen friends of President Jacob Zuma, has announced plans to exit South Africa, the central bank said on Monday.

The Bank of Baroda, the last financial institution in South Africa offering banking services to the Guptas’ Oakbay investment holding firm, did not immediately reply to requests for comment.

The South African Reserve Bank (SARB) did not disclose reasons for the bank’s departure, but said it was in talks to ensure its “orderly withdrawal from South Africa so that no depositor is disadvantaged”.

In September, Oakbay lost a court bid to keep their accounts open at Baroda’s South African unit.

However, the next month the High Court ordered Bank of Baroda to keep Oakbay’s and its subsidiaries accounts open, pending a final application. It is not clear whether the Gupta-owned firm pursued the matter.

The Gupta family is accused by a public anti-corruption watchdog, senior members of the ruling African National Congress and opposition parties of using their friendship with Zuma to influence cabinet appointments and win state contracts.

Zuma and the Guptas deny any wrongdoing.

Between December 2015 and April 2016, all four major South African banks – Standard Bank, Nedbank, Barclays Africa and FirstRand – terminated the accounts of companies controlled by the Guptas, citing reputational risk.

In South Africa, the SARB’s actions suggested Bank of Baroda’s involvement in the “State Capture” scandal: an avalanche of allegations that President Jacob Zuma was under the sway of three brothers from Saharanpur, Uttar Pradesh — Ajay, Atul, and Rajesh Gupta, collectively known as “The Guptas”

As the scandal of state cpature continues to unfold, Bank of Baroda’s role as the Gupta family’s banker of choice, for their most controversial deals, has attracted increasing attention from South African regulators, investigators and the press.

A joint investigation of thousands of pages of court documents, bank records, SARB records, internal Gupta company correspondence, and interviews with bank officials, byHindustan Times, South Africa’s amaBhungane Centre for Investigative Journalism,Finance Uncovered and Daily Maverick’s Scorpio unit reveals a laundry list of potential violations, and a seeming disregard for banking ethics and regulations by Bank of Baroda executives.

An example: As early as 2010, Bank of Baroda financed the purchase of a luxurious house that was bought in the name of President Jacob Zuma’s fourth wife, but paid for by the Guptas through Bank of Baroda accounts operated by secretive trusts.

And as late as November 2016, an investigation into the Guptas’ controversial purchase of a coal mine by South Africa’s Public Protector, a constitutional public ombudsman, found that “the conduct of the Bank of Baroda appears highly suspicious” in the bank’s role in underwriting the deal.

Bank of Baroda stood by the Guptas as four major South African banks shut their bank accounts in 2016 on the grounds that anti-money laundering laws made it too risky to do business with the family. While Bank of Baroda executives say they began to “exit” their relationship with the Guptas in July 2016, the bank sent out account termination notices only a full year later, in July 2017.

The Guptas took the bank to court.

At the time of going to press, Bank of Baroda was stuck with the accounts of at least 35 Gupta companies, according to the most recent court disclosures.

What follows is an inside account of how a culture of wilful blindness in Bank of Baroda’s South Africa operations exposed India’s second largest bank to a damaging investigation in a foreign jurisdiction.

Bank executives sought personal favours from the Guptas and enjoyed their hospitality, emails show, while the family used Bank of Baroda accounts to funnel millions through an international network of secretive companies and trusts.

Personal favours aside, the systemic shortcomings identified by the SARB audit lead back to Bank of Baroda’s compliance department in Mumbai, raising questions about the bank’s operations in India and across the world.

South African investigators now are probing whether the money in these accounts included kickbacks for prominent South African politicians for awarding dodgy government contracts to the Guptas.

In October 2017, the Financial Times reported that American authorities had begun probing the Gupta family as some of these transactions were in US dollars, raising questions of how much the Bank of Baroda knew, and what action, if any, the bank took.

Today, as the Indian government prepares to pump Rs 88,100 crore into the country’s ailing public sector banks, of which Bank of Baroda will get Rs 5,307 crore, the bank’s actions in South Africa offer a sobering glimpse of how some of India’s biggest banks may be doing business.

When Hindustan Times sent Bank of Baroda a detailed questionnaire, the bank arranged two interviews with CEO PS Jayakumar, only to cancel both meetings without explanation at the last minute. Bank of Baroda has not responded to repeated requests for comment on the events described below.

Hindustan Times also wrote to the Gupta brothers, their family lawyer, and the South African High Commission in India, but did not receive any responses.

Sources: Daily Maverick, Hindustan Times

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