The #Laundry: the ‘shadow bankers’ driving organized crime

Consider this dilemma.

It is Covid lockdown and the sale of cigarettes is banned. You still manage to smuggle huge quantities of cigarettes into the country, or perhaps you continue to produce them here and swear they are for export.

Either way, cigarettes are sold under the counter and the heavy “sin taxes” are conveniently forgotten. The result: literal boxes of cash that you would rather not give to anyone.

What to do?

Consider the dizzying abundance of variations on this dilemma. You skimmed a few million from a tender. You have managed to get your employer’s books in order and ‘appropriate’ part of the turnover. Maybe you sell drugs or guns – or you sell drugs and guns wholesale to people who sell drugs and guns retail. Do you have a business forum with a protection racket or a kidnapping ring?

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

What you need is a banker you can trust.

South Africa is sometimes praised for its large and advanced formal financial sector, a sign of economic development, at least to some.

But South Africa has an equally large and sophisticated illicit financial sector, with a menagerie of outright crooks and gangsters, as well as ‘legitimate’ bankers and financial superheroes brandishing real registration numbers with the FSCA.

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 specifically dealing with money laundering, where organized crime enables all other organized crime – although sometimes it exists in a legal gray zone, making it difficult to prove which side of the law states a specific case.

This is further compounded by the fact that there are few precedents in South Africa for money laundering to be prosecuted as a standalone crime.

But this nebulous industry has long since gained prominence thanks to a small number of spectacular cases that recently made headlines.

This involves tobacco baron Simon Rudland and his associates (see SARS statement here and amaBhungane reports here, here and here) as well as Sasfin Bank. To this must be added the spectacular evidence gathered last year by a damning Al Jazeera documentary series.

Rudland is fighting SARS in court and has widely denied the claims made by Al Jazeera and other media reports.

The attention paid to these examples gives the distorted impression that they are somehow unusual. In reality, however, they are part of a much larger enterprise.

Our money laundering project aims to break the secrecy and obfuscation at the heart of this enterprise in its various incarnations.

Who collects the boxes of cash from the cigarette seller and where do they go? How does money get from point A to point B, usually via a circuitous route via points C, D and E?

The “Golden Mafia,” as Al Jazeera has dubbed it, and its counterpart, the illicit tobacco industry, will be there, but amaBhungane will show that some actors in that world have much longer tentacles than is commonly known.

We have collected data and documents showing how tens of billions of rands have been transported through the region over the years, seemingly displacing the spoils of crime and corruption.

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

We will search the aging gold fields of Johannesburg, where mining has given way to a massive illegal gold trade, facilitating tax fraud, smuggling, money laundering and even fake mining that provides cover for all of the above.

Later in the series, we’ll reveal the inner workings – and clientele – of the cash-in-transit companies that operate as “shadow banks” for anyone and everyone in the criminal economy.

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

The rot in the formal banking system will be prominent.

There are far too many skeletons in the closets of the institutions designed to keep the formal economy on track. AmaBhungane will show how they have happily harbored laundry entities so patently suspicious it is beyond belief.

And no, it’s not just Sasfin.

We will also look at the real industry that has sprung up around the creation of front companies using hijacked identities.

We mention names and show how it’s all done.

AmaBhungane has gathered extensive evidence from Reserve Bank and SARS investigative data filed in the ordinary court, corporate records in South Africa, neighboring countries and beyond, voluminous bank statements dating back a decade or more and lesser-known testimonies from some under the radar. to ask.

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

We have tried to address this tragic lack of follow-up and a few things have become clear.

The characters in this industry are endlessly customizable. The authorities continue one operation and before you know it, the same people have set up something new.

Another painful truth we have learned is that the best investigations in this world are not conducted by the police, but by the tax authorities and the Reserve Bank. The consequences almost never extend beyond unaffordable, and therefore almost theoretical, tax assessments or the seizure of virtually empty bank accounts.

This has motivated us to ask whether anyone at South African banks is conducting any due diligence on customers. Is there even a nominal barrier to identity theft? Do we have any interest in criminal prosecution of complex financial crimes?

The stories in this series make it difficult to answer yes to all these questions.

Meanwhile, billions 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 this isn’t bad enough, the presence of a well-oiled money laundering system is a beacon to a wider international clientele – regional mafias and criminals from all corners of the world – and it is clear that they are answering the call.

So while the money men don’t pull the trigger or manipulate the tender, they are crucial to those who do.

That’s why we care – and why you should too. Beware of City of Gold: Part one tomorrow!