Picture: ISTOCK
Picture: ISTOCK

The Bank of China has become the latest financial institution to be drawn into the controversy surrounding the closure of bank accounts belonging to companies linked to the Gupta family.

Steel maker VR Laser said in papers filed in the North Gauteng High Court in January that the Bank of China demanded that it ditch the Guptas as shareholders shortly before closing its accounts just three weeks after they were opened because of perceived political risk.

The bank is the third-largest in China and is 64% owned by the Chinese government’s sovereign wealth fund.

VR Laser, which supplies steel products to arms maker Denel, approached the Bank of China after Nedbank and Standard Bank closed its accounts last year citing reputational risk.

In letters to VR Laser, Nedbank said it could no longer do business with the firm because its Gupta shareholding posed "significant reputational risk".

The letters were handed to VR Laser CEO Pieter van der Merwe by a Nedbank official who visited his factory in Boksburg on May 9.

In a "chronology of events" attached to his affidavit filed on January 20, Van der Merwe said when he asked the official why his accounts were being closed she "stated vaguely that the termination had to do with ‘everything going on in the media as well as things going on with the Gupta family’ which Nedbank perceived as a reputational risk to it".

Van der Merwe pointed out to no avail that the Guptas had no shareholding in VRLS Properties, one of the companies whose account Nedbank wanted to close. Nedbank closed all his accounts on June 9.

"It was clear that any perceived association between the Gupta family and its members and VR Laser was deemed sufficient for Nedbank to terminate its relationship with VR Laser and its related entities without any proper investigation into the actual shareholding of these entities," he said.

Standard Bank followed suit on July 29, closing two current accounts, two money market call accounts, a fleet account and a corporate credit card account. VR Laser had opened its account with the Bank of China on September 8.

On September 27, it transferred R500,000 from its Standard Bank account to its new account with the Bank of China, triggering a request to clarify the "source of the funds".

Van der Merwe explained in e-mail correspondence that his company generated between R14m and R25m a month "depending on sales".

"Do I understand you correctly that I need to provide you with a breakdown of each and every client that pays money into my account?" he asked.

Van der Merwe requested an urgent meeting. "If you would like to visit our facility in Boksburg to understand our business we will really appreciate it."

The next day he received a letter stating that his account had been closed "in terms of the bank’s internal rules and risk appetite". Van der Merwe said a business development official at the bank had told him "that they were very sorry" about closing his account but the "instruction" had come from "someone higher up in the bank".

"The account had been closed because VR Laser was perceived to be a political risk because of its shareholding. The bank representative indicated that it was ‘the whole Gupta thing’ and that the Gupta family were not sanctioned on the South African Reserve Bank list and therefore the Bank of China could not afford the risk of doing business with VR Laser.

"The representative indicated that the Bank of China would do business with VR Laser if it restructured its shareholding to exclude the Gupta family."

Van der Merwe said Standard Bank had made the same demand. He related a site visit from a Standard Bank official bearing termination letters who told him "the only solution for VR Laser would be for it to change its shareholding".

He "made it clear that Standard Bank would not be satisfied for as long as the Gupta family held a beneficial interest in the shares of VR Laser".

Asked on Thursday what impact the account closures had on his firm and which financial institution was processing his payments, Van der Merwe said he would not comment while litigation was pending.

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