Record-Setting Bank Fraud in South Africa Revealed in Intensive Report
Chairs, stakeholders, employees, and more of one South African bank, Venda Building Society, committed $2.4 million in fraud over the course of only a few years.
An investigation has revealed the most shocking instance of bank fraud in South African history. Two billion rand (about $140 million) was effortlessly stolen from Venda Building Society (VBS) Bank in less than four years. The cash was shared amongst a few dozen now disgraced individuals, including a former KPMG partner, who crippled the bank and forced it to go under curatorship – despite KPMG’s role as one of the world’s leading companies for auditing, tax, and advisory services.
Jacob Zuma, Former South African President Implicated in Bank Fraud
The VBS Bank was started in 1982 as a wholly black-owned financial institute. In March 2018, it was placed under curatorship by the South African Reserve Bank (SARB) after allegations of corruption and fraud, which had even roped in Jacob Zuma, the country’s former president. Bank officials retaliated saying the bank was being targeted because its fast growth was a threat to bigger banks, not to mention it was also fully black-owned.
Advocate Terry Motau was charged by SARB to investigate the affairs of VBS and to determine whether it carried out any activities with a deliberate intention of defrauding its customers, whether its business practices were questionable, and whether there were any misconducts by its directors, shareholders, stakeholders, staff and others.
In his report, Motau says he was shocked to have answered “yes” to all of his queries.
Corruption in Every Corner
The bank showed inconsistencies in following its stated values of “maintaining highest standards of governance, local empowerment and ethics.”
“VBS is corrupt and rotten to the core. Indeed, there is hardly a person in its employ in any position of authority who is not, in some way or other, complicit,” noted Motau in his report.
53 people were revealed to have collectively received about $140 million, with Tshifiwa Matodzi, the bank’s Chairperson, having received the largest share of about $22 million.
Sipho Malaba, a partner of KPMG, who had been the individual leading the audit of VBS, was revealed to have received about $2.3 million dollars to help cover up the bank’s irregularities.
This revelation has dealt a major blow to the authenticity of KPMG as one of the Big Four audit companies in the world.
How the VBS Bank Fraud in South Africa was Executed
To keep their crimes acts under the radar, the perpetrators employed remarkably simple measures, such as loans which were then never paid back. The report found that:
- The most exploited method was writing car or home loans. The bank would then turn a blind eye on that loan, wait for the recipient to make another loan application, approve, turn a blind eye again, and the cycle would continue.
- Each of the recipients had been “rewarding” themselves with at least $65,000 per month since 2015. These monies were sugarcoated as “gratuitous payments” and not as bribes or stolen money.
- A Dudu Myeni Foundation was revealed to be a beneficiary. Upon investigation, no such entity was found to be in existence but Motau deduced it to be representing the Jacob Zuma Foundation which is chaired by Dudu Myeni.
- When KPMG discovered and started investigating Sipho Malaba’s fraudulent dealings with VBS, he acquired a fake letter from the bank which exonerated him as he continued to receive his “gifts.”
Motau recommends criminal action be taken against all those involved and the bank be wound up.
When news of the curatorship had broken out, panicked depositors had spent the night in long queues waiting to withdraw their savings. Municipals that had deposited their money with the bank have also been forced to drastically cut their budgets, a move that will negatively affect their citizens.