Gold Leaf Tobacco: SARS claims billions from Sasfin in Rudland money laundering debacle

In a novel case filed at the Gauteng Division of the High Court just before Christmas 2023, the SA Revenue Service aims to hold Sasfin Bank Limited liable for billions in damages the taxman said it suffered due to lost taxes.

The SA Revenue Service alleges that at least R8.2-billion in untaxed funds, linked to the vast Gold Leaf Tobacco money laundering racket, were unlawfully sneaked out of the country over the past decade – mainly with the help of 11 Sasfin employees.

This happened amid repeated warnings over the lapse of risk and control measures at the bank’s foreign exchange division.

The South African Revenue Service (SARS) filed a R4.8-billion damages claim against Sasfin Bank Limited, dated December 22 2023. In an unprecedented step, SARS argues that Sasfin must be held liable for damages suffered by the revenue service because the bank facilitated large-scale tax evasion between 2013 and 2023.

Our probe triggered a Sens announcement issued on February 27, around the same time bank CEO Michael Sassoon answered questions sent to him on February 23. The backstory here involves SARS’s initial findings in 2022 that at least five Sasfin employees assisted an extraordinary transnational plunder network operated by Zimbabwean tobacco boss Simon Rudland in moving at least R3-billion offshore without paying tax.

Sassoon at the time vehemently denied that as much as R3-billion could have washed through the bank’s system without senior management knowing. By October 2022, Sassoon acknowledged to Scorpio that the risk and control measures at the bank were found wanting. According to Sassoon, the bank had gone through stringent processes to ensure the crimes would not be repeated.

Yet, SARS documents filed just before Christmas in 2023 suggest that the money that washed through Sasfin’s system was almost three times more than initially thought. Worse, perhaps, is that on at least three occasions in November 2022 and February 2023, long after Sasfin management was very much aware that the bank was probably harbouring criminals, large sums were again unlawfully moved offshore.

In this latest court action, SARS told the Gauteng Division of the High Court in Pretoria that investigators found that 19 companies linked to Rudland’s business operations used the Sasfin system over the course of a decade to unlawfully – and mostly unnoticed – sneak R8.2-billion offshore. On the back of fictitious invoices and incomplete documentation these funds were moved from company accounts held at Sasfin to accounts in destinations like Dubai, Switzerland and Mauritius.

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Gold Leaf Tobacco: SARS claims billions from Sasfin in Rudland money laundering debacle
Daily Maverick wrote extensively about the initial allegations. To hide the crimes, Sasfin employees conspired to wipe the payments off the Sasfin system and the relevant companies’ bank statements. Cross-border money movement Bopcus reports to the SA Reserve Bank were also deleted. Sasfin managers seemingly remained blissfully unaware of these shenanigans until SARS’s extensive Rudland investigation reached the Sasfin shores.

On Tuesday, Sassoon was at pains to say that independent investigations “found no evidence of any involvement by senior management or directors” at Sasfin. These investigations did unearth an undisclosed number of employees involved, whose contracts were terminated.

Sasfin opened criminal cases against 11 of its former employees, six more than the initial five eyed by SARS. In the December summons, SARS argues that Sasfin’s repeated negligence and lax controls allowed for the abuse and loss: “Sasfin breached its legal duty by directly or indirectly assisting the taxpayers and GLTC [Gold Leaf Tobacco Corporation] to unlawfully export the funds abroad…”

SARS argues that “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”. The summons consists of two claims.

The first claim focused on 18 companies, all clients of Sasfin’s foreign exchange division, with names such as Chair Boyz (Pty) Ltd, Lone Eagle General Traders (Pty) Ltd and Ocean Twelve General Trading (Pty) Ltd.

The companies collectively moved R5.33-billion from their local Sasfin accounts to unnamed offshore accounts, SARS’s summons states. Neither income tax nor VAT payments totalling R1.96-billion for the period under investigation were declared. SARS argues that Sasfin’s negligence caused the economic loss.

On the face of it, these companies mostly seem unrelated and some show signs of being shell companies. The inference in SARS’s papers, for reasons not disclosed so far, is that the companies, in various degrees, link to Rudland’s GLTC and are alleged to form part of a vast cross-border money laundering racket involving smuggled tobacco and gold.

Some of the listed companies were mentioned in SARS’s 2022 successful ex parte case in which the revenue service seized control of the local assets held by Rudland and business partner Ebrahim Adamjee.

All but four of these 18 companies are in the process of closing down or had already closed down (a deregistration process at CIPC). The local subsidiary of the German construction equipment seller Putzmeister SA (Pty) Ltd is one of the few legitimate companies listed in the SARS papers. According to SARS, the company unlawfully moved R67.89-million out of South Africa in the nine months ending in February 2019. amaBhungane revealed how former company management got caught up in the illicit activities.

The second claim relates to tobacco products manufacturer GLTC. Between June 2016 and May 2018, GLTC’s local Sasfin account received R2.9-billion in undeclared funds. SARS told the court that GLTC owed R4.46-billion in income tax and VAT by May 2023. Investigations suggest GLTC locally does not have the available assets and resources to settle its tax debt in full. The shortfall “at least” will be the sum of these undeclared funds. For that reason, SARS holds Sasfin liable for another R2.9-billion for “damages suffered”.

In total, SARS says it is owed R4.8-billion in damages for the taxes it now cannot raise because these companies either closed down or do not hold enough local assets to pay the damages claim. Sassoon consulted a heavyweight legal team who are of the “unequivocal” opinion that the SARS claim “has a very remote likelihood of success”. The team includes professor Dale Hutchinson, professor Michael Katz, Aslam Moosajee and Advocate Wim Trengove SC.

“On the basis of this strong legal opinion”, Sassoon said, “we concluded that the [SARS] claim will not result in the recognition of any liability.”Sasfin has no choice but to energetically challenge the claim:

The bank’s balance sheet will buckle under a near R5-billion loss. Sasfin’s annual financial statements for the year ended June 2023 shows the bank holds R14-billion in assets. Its single largest asset was its loans and advances of R9-billion. Cash and cash equivalents was stated as R866-million. A local tax expert consulted by Scorpio confirmed there “has never been a claim in South Africa where SARS argues a bank should be held liable because its negligence has caused economic loss”.

The tax expert said SARS will fight an uphill battle to prove “wrongfulness”, an opinion shared by Sassoon’s team. Scorpio’s tax expert further suggested that the courts are generally “reluctant to expand on the doctrine of economic loss”. Neither the SA Reserve Bank nor SARS confirmed by the time of publishing whether criminal charges in the matter were laid with the Hawks or police.-newsday