As screws tighten on the leading gold processing and refining firm, Rappa Holdings, with the South African Revenue Service (Sars) demanding sight of its subsidiaries’ financial statements, the organisation has found itself in a sticky situation with two local banks ditching it.
Capitec Bank and Bidvest Bank cut off Rappa Holdings and Rappa Resources as clients due to non-compliance and Sars circling.
But Bank Zero, a digital bank owned by the former CEO of the First National Bank, Michael Jordaan, has brought a ray of hope, offering the holding company and its subsidiaries a new home.
The move by Bank Zero to provide banking facilities for Rappa entities has also raised concerns about the bank’s way of doing business with a company that had two well-known banks terminating their services with the entity.
Bank Zero’s co-founder and executive director, Lezanne Human, responded to Sunday World’s questions by stating that the bank was taking due diligence very seriously.
This was after questions regarding the business deal that Bank Zero has with Rappa were sent to Jordaan, who later asked Human to respond to this
publication.
“As a digital bank, we have streamlined processes which pick up on issues with prospective customers during on-boarding and with existing customers throughout their life cycle.
“During onboarding, our systems automatically check extensively for adverse media and sanctions through a range of sources. We also check for other info such as politically exposed person (PEP)status, etc, but not mentioning this here because [it is] not relevant to the specific topic at hand,” said Human.
She pointed out that should any prospective customer be flagged, a manual due diligence is performed to identify true matches versus false positives, in which the investigation includes additional special measures.
“Should adverse media be confirmed, the agent may not make the final decision, and it is escalated right to the top (exco). We can confirm that to date, no prospective customer with a true-match adverse media finding has been allowed onto our customer base.
“We can also confirm that many prospective customers have been declined from being onboarded onto our customer base after confirming a true-match adverse media finding. Note that this process covers both individuals and businesses. And with businesses, we furthermore apply this same stringent checking to all individuals linked to that business.”
Without mentioning the name of Rappa Resources and associated businesses, Human said that Bank Zero can confirm that the companies were subjected to the vetting processes and handled accordingly.
She said that due to the Protection of Personal Information Act, Bank Zero may not publicly disclose any further information about these entities unless approved by a regulator.
“Bank Zero uses all information publicly available as well as provided through other sources when assessing entities applying for Bank Zero profiles. All prospective customers undergo the above process. There are no exceptions – our systems will not allow that, and will block the prospective customer from being onboarded. We absolutely do not tolerate any activity remotely associated with money laundering or money launderers,” said Human.
In March, Bidvest terminated banking relationships with Rappa Holdings, Rappa Resources, 8 Mile Investments and Knightsbridge Cobalt Corporation, as all these entities are linked to Rappa Holdings.
In the letter sent to Rappa Holdings by Bidvest in March, addressed to the CFO, the bank said that there were terms and conditions which constituted an agreement governing the relationship between two parties.
“The terms and conditions which constitute an agreement governing your relationship with the bank entities either party to terminate the agreement by providing the other party with a 30-day prior written notice. The bank has elected to exercise its right of termination as provided by the agreement pursuant to clause 20.1 of the terms and conditions. “The bank has assessed the conduct on your accounts and determined that the transactional behaviour on the accounts is outside of its risk appetite.
“Accordingly, this letter serves to notify you, as we hereby do, that your accounts held with Bidvest Bank will be closed after 30 days of transmitting this letter. After the expiry of the notice period, the bank will not process or honour any instructions received on these accounts, including pre-existing debit orders,” wrote Bidvest executive head of business banking Herman Sambo.
Last July, Capitec divisional manager in Business Bank Anti Money Laundering, Frik Basson, also sent a letter to Rappa Holdings saying that the bank would no longer process any foreign currency transactions on behalf of Rappa.
The South African Reserve Bank’s Prudential Regulation Authority refused to comment on the matter.
“We don’t comment on any operational matters of institutions we regulate,” the authority’s spokesperson Thoraya Pady said yesterday.
On Friday night, the Financial Sector Conduct Authority said, “Our conduct of business division has advised that the questions be directed to the Financial
Intelligence Centre.”
Rappa Resources and Sars have been involved in a legal dispute concerning VAT refunds and assessments.
The case, which has been ongoing for several years, involves Rappa Resources seeking to compel Sars to release withheld VAT refunds and challenging Sars’ decisions to issue assessments related to those refunds.
Rappa Holdings CEO, Graham Pelham said: “We are not going to say much about our bank accounts over the phone with someone I do not know, however what I can tell you is that there is a smear campaign against us by competition. You must investigate who owns all the banks in South Africa and who owns the mines in the country, and you will uncover the mafia ring owning everything in South Africa. There is an engineered smear campaign peddled against us.”
