Why Standard Bank closed Oakbay's accounts

Johannesburg – Suspicious transactions are among the reasons why Standard Bank Group said it closed the accounts of Oakbay and its associated entities in June 2016.

This is according to an explosive affidavit filed by Standard Bank on Wednesday in the North Gauteng High Court.

Standard Bank's comprehensive affidavit was filed in response to a court bid launched by Finance Minister Pravin Gordhan in October in which he sought to ask the court for a ruling that he doesn’t have the authority to interfere with whom banks choose as clients. 

Subsequently, Standard Bank's affidavit details the events that led Standard Bank to close the accounts belonging to the Oakbay companies.

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Throughout the affidavit, the financial institution emphasises its obligation to comply with domestic and international standards of best practices to maintain its reputation.

These include compliance with the Banks Act, Financial Intelligence Centre Act (Fica) and the Prevention of Organised Crime Act (Poca).

“The best way to avoid prosecution is not to have dealings with the customer who have engaged in or likely to engage in suspicious or unusual transactions,” Standard Bank's affidavit stated.

The bank has also indicated this in a letter to former CEO Nazeem Howa.

The letter highlights that laws such as Fica, Poca, and, among others, the South African Companies Act, prevent the bank from having dealings with entities that would make Standard Bank party to the “contraventions” of these laws.

The contravention of these laws also has implications for the state, said Standard Bank. According to the affidavit, failing to comply with international standards could cause South Africa to be “re-rated” by correspondent banks and their regulators as a “high risk jurisdiction”, which could influence access to international financial markets.

Ian Sinton, Standard Bank’s legal counsel, indicated that these legal obligations were made apparent to Mineral Resources Minister Mosebenzi Zwane and his deputy, Godfrey Oliphant in a meeting earlier this year. 

In an effort to prevent illicit transactions and the financing of terrorism, banks are also required to keep a risk profile of their clients. In the affidavit, Standard Bank indicated that new information regarding Oakbay and its related entities being “politically exposed persons” also raised a red flag.

Banks are required to review customers if adverse information comes to light. Standard Bank listed examples of this. These include media reports of the R2.15bn acquisition of Optimum Coal Mine from Glencore by Tegeta Exploration and Resources, which was alleged to be politically influenced.

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Standard Bank also listed members of the Gupta family, Rajesh, Atul and Ajay Gupta being implicated in the public protector’s state capture report as alarming.

The decision by other banks and auditing firm KPMG to disassociate from Oakbay because of its risk also influenced Standard Bank’s decision.