The #Laundry — the ‘shadow bankers’ powering organised crime

Consider this dilemma.

It is Covid lockdown and cigarette sales are banned. You manage to sneak huge volumes of cigarettes into South Africa nonetheless, or perhaps you keep manufacturing them here and pinkie-swear they are for export.

Either way, cigarettes are sold under the counter and the onerous “sin taxes” are conveniently forgotten. The result: literal boxes of cash you’d rather not declare to anyone.

What to do?

Consider the dizzying profusion of variants of this dilemma. You skimmed a few million rands off a tender. You cooked the books at your employer and “appropriated” a chunk of revenue. Perhaps you sell drugs or guns — or sell drugs and guns wholesale to the people who sell drugs and guns retail. Do you run a business forum cum protection racket or kidnapping ring?

Or maybe you want to contribute to a cause abroad that involves unsavoury, sanctioned groups.

What you need is a banker you can trust.

South Africa is sometimes lauded for its large and sophisticated formal financial sector, a marker of economic development, at least for some.

But South Africa has an equally large and sophisticated illicit financial sector involving a menagerie of outright crooks and gangsters, as well as “legitimate” bankers and finance whizzes brandishing real registration numbers with the Financial Sector Conduct Authority.

There is often very little reason to draw a line between the two worlds and in some cases they merge or collaborate with a nod and a wink.

AmaBhungane has embarked on a major series dealing with money laundering, the organised crime enabling all other organised crime — although it sometimes occupies a legal grey zone that makes it difficult to prove which side of the law any specific case stands.

This is compounded by the fact that in South Africa there are few precedents where money laundering has been prosecuted as a standalone crime.

Long-overdue notoriety

However, this nebulous industry is gaining long-overdue notoriety due to a few spectacular cases that have recently made headlines.

These involve tobacco baron Simon Rudland and his collaborators (see the SA Revenue Service — SARS — statement here and amaBhungane reports here, here and here) and this report about Sasfin Bank. To this must be added the spectacular evidence assembled in a damning Al Jazeera documentary series last year.

Rudland is fighting SARS in court and has issued broad denials about the Al Jazeera claims and other media reports.

The attention lavished on these instances creates the warped impression that they are somehow unusual. In reality, however, they are part of a much bigger enterprise.

Our money laundering project aims to pierce the secrecy and obfuscation that are central to this enterprise in its various incarnations.

Who collects the cigarette salesperson’s boxes of cash and where do they go? How does money get from point A to point B, usually detouring through points C, D and E?

The “Gold Mafia”, as Al Jazeera has dubbed it, and its twin, the illicit tobacco industry, will feature, but amaBhungane will show that some of the actors in that world have far longer tentacles than is commonly known.

We have amassed data and records that show how tens of billions of rands have moved throughout the region over the years, seemingly dissipating the spoils of crime and corruption.

Our series will also navigate the impressive networks based on illicit flows to Hong Kong, a corner of the wider industry that has remarkably managed to keep out of the spotlight.

We will scour the ageing gold fields of Johannesburg where mining has made way for a gargantuan illicit trade in gold, facilitating tax fraud, smuggling, money laundering and even fake mining that provides cover for all the above.

Later in the series, we will reveal the inner workings — and clientele — of the cash-in-transit companies operating as “shadow banks” for all and sundry in the criminal economy.

This includes everyone from the usual suspects like the Gupta family network, through to the most obscure and unlikely channels for moving dirty money.

The rot in the formal banking system will feature prominently.

There are far too many skeletons in the closets of the institutions meant to keep the formal economy on the right path. AmaBhungane will show how they have happily housed laundry entities so obviously suspicious it beggars belief.

And no, it is not just Sasfin.

Hijacked identities

We will likewise look at the veritable industry that has arisen around the creation of front companies using hijacked identities.

We will name names and show how it is all done.

AmaBhungane has gathered extensive evidence from SA Reserve Bank and SARS investigation records filed in ordinary court, corporate records in South Africa, neighbouring countries and further afield, voluminous bank statements going back a decade or more and lesser-known testimony from below-the-radar inquiries.

Valuable source documents have also lain largely ignored in the annexes to a 6,000-page report produced for the Zondo Commission by researcher Paul Holden. Due to the limited scope of that investigation, countless leads not involving the Guptas were never followed.

We have tried to address this tragic lack of follow-through and several things have become clear.

The characters in this line of business are endlessly adaptable. Authorities cotton on to one operation, and before you know it, the same people have set up something new.

Another painful truth we’ve learned is that the best investigations into this world are not instigated by the police but by SARS and the Reserve Bank. The consequences hardly ever extend beyond unpayable, hence almost theoretical, tax assessments or the seizure of nearly empty bank accounts.

This has motivated us to ask whether anyone at South Africa’s banks conducts any due diligence on customers. Is there even a nominal impediment to identity theft? Do we have any interest in the criminal prosecution of complex financial crimes?

The stories in this series make it hard to answer “yes” to any of these questions.

Meanwhile, billions of rands leave South Africa unseen and untaxed — an invisible drain that not only serves criminals but effectively promotes crime because it means there are reasonable prospects of getting away with it.

If that is not bad enough, a well-oiled laundering system is a beacon for a wider international clientele — regional mafias and criminals from all corners of the Earth — and it is clear that they are heeding the call.

So, while the money people do not pull the trigger or rig the tender, they are crucial enablers of those who do.

That is why we care — and why you should too.

Watch out for City of Gold: Part One tomorrow. DM