Thanks to this technology, alleged corruption like that of Jacob Zuma, VBS bank and the EFF could be exposed in the finest detail. In this article, we look at the lead up to how South African citizens were defrauded out of around 2 billion rand. This includes a capture of the case’s current status and insight on the fraud examination process.

 

Background

In 1982, the Venda Building Society (VBS) bank was established by the Venda Homeland  Government. Initially the bank was a small financial institution without the bells and whistles of  a national bank like FNB, ABSA and Standard Bank. VBS’ main priority was to help communities to invest through the Mutual Banks Act of 1993.

The Mutual Banks Act of 1993 requires that Mutual Banks be regulated by the Reserve Bank. Within their management system, depositors become shareholders with voting rights. This exact structure led to the initial doubts around VBS bank.

In 2016 the bank granted Jacob Zuma a loan of around R7 million to pay back his debt for the upgrades on his Nkandla home. During this same period, Zuma became one of the bank’s major shareholders. This changed the small regional bank to a national bank overnight.

Shortly after this, ANC-controlled councils in Limpopo and one in Gauteng started depositing money into VBS bank. These funds were then redirected to bank executives like Mphephu Ramabulana, politicians and 52 other implicated individuals.

In 2018 the bank collapsed, unable to pay its customers.

What’s Happening Now?

At the beginning of this article, we mentioned the power of technology in the modern world. It is thanks to contemporary connectivity and crafty fraud-examination techniques that the movement of funds and those who authorised them could be investigated. 

In the recently released report by advocate Terry Motau and law firm Werksmans, two key factors were brought to light. It is now evident how the finance officials at councils were stopped from asking questions regarding the transfer of funds to VBS bank. Included was how these funds were distributed and finally channelled to Julius Malema and deputy EFF president Floyd Shivambu. The report also revealed how these two spent the money on personal luxuries.

The chairperson of VBS and Vele Investments, Tshifhiwa Matodzi, was first arrest on the 17th of June 2020. Matodzi was charged for manipulating the bank’s financials to hide its true state. Followed were 8 others who were charged with money laundering, theft, corruption and fraud.

What is the fraud examination process?

Our Certified Fraud Examiner, Nick Olivier, explained that in essence, the standard fraud investigation procedure would include receiving the complaint and conducting a preliminary investigation to determine if there was merit to inspect any further. If additional investigation is warranted, a file is opened, and the investigation is planned with both witnesses and victims being interviewed. 

Running parallel to this is the identification, preservation, collection and examination of evidence in order to prove that elements of the crime are under investigation. It is either at this point or possibly at an earlier stage that identified suspects are interviewed. Depending on the mandate or scope of the investigation, a criminal case should be registered with the South African Police Service.

The opening of a criminal case does not prevent a victim from initiating a civil case against the perpetrators who caused a loss, in order to recover the ill-gotten gains. 

Sources

https://www.news24.com/citypress/News/what-is-vbs-mutual-bank-everything-you-need-to-know-2 0160922

https://www.dailymaverick.co.za/article/2020-06-18-vbs-bank-heist-arrests-whos-next/#gsc.tab=0

https://www.timeslive.co.za/sunday-times/business/2018-10-10-venda-king-drawn-into-vbs-mutualbank- drama/

https://www.dailymaverick.co.za/article/2018-10-10-r2bn-looted-from-corrupt-rotten-vbs-bank-saysreport/

https://ewn.co.za/2020/06/17/from-bank-heist-to-arrests-a-timeline-of-the-vbs-scandal