The Sasfin Dilemma: SARS' Multi-Billion Rand Claims and the Potential Ripple Effect on South African Banks

SARS has opened a legal front against Sasfin Bank with a pair of hefty damages claims totaling R5-billion, in a case that could set a precedent affecting multiple banks in South Africa's financial system. The allegations rest on billions in payments made through Sasfin by companies, many with a history of featuring in investigations of regional money laundering.

SARS contends these companies have left enormous tax debts unpaid, facilitated by Sasfin through the creation of offshore assets, backed by what SARS claims to be fraudulent documentation. The spotlight is not only on the Zimbabwean tobacco tycoon Simon Rudland's Gold Leaf Tobacco Corporation, which alone channelled R2.9-billion offshore, but also on a tapestry of other entities. These include companies implicated in state capture, like those associated with the infamous Gupta family.

Gold Leaf Tobacco had already been flagged by Sasfin as a 'high risk' as early as 2016. Sasfin's internal investigation flagged several transactions as fraudulent but still took significant time to react. This, SARS argues, makes Sasfin complicit to the tune of R2.9-billion of Gold Leaf's R4.46-billion tax assessment.

The other entities, totaling 18, are not as well-known but are just as implicated. They moved a combined R5.3-billion through Sasfin, contributing to the R1.97-billion that SARS alleges in tax debt. Actinic Holdings, implicated in prior money laundering investigations, is one such entity, having operated not only through Sasfin but other banks like Bidvest and Habib Overseas Bank.

Moreover, a company named Putzmeister SA, a local branch of a German entity, allegedly participated in laundering money through an inventive scheme involving fake court orders — a tactic potentially replicated across multiple banks — drawing further concern to the broader banking landscape.

Entities linked to the externalization of funds associated with the Guptas — Zokubyte, Coral General Traders, and Varlozone — also feature in the claim. Their transactions, identified in reports to the Zondo Commission and documented in Al Jazeera's exposés, allegedly funneled substantial amounts through Sasfin's services.

Further digging into the list of implicated entities, Lone Eagle and Ocean Twelve General Trading stand out, with Ocean Twelve moving roughly R2-billion out of the country via Sasfin.

The legal case against Sasfin, based on the existing evidence, showcases the systemic risks and vulnerabilities in South African banks to exploitation by money launderers and other illicit actors. As the case unfolds, it also poses serious questions about the regulatory measures in place and the actions (or inactions) of banks in curbing financial crimes.

Sasfin has responded with skepticism to the claims, indicating received legal opinions which consider SARS' demands as falling outside applicable law with a "very remote likelihood of success". Nevertheless, the SARS action against Sasfin heralds possible legal battles with other financial institutions, marking a potentially new era of stringent accountability within the banking sector — if SARS succeeds.