Economy

KPMG missed more money laundering red flags

Date: Nov 27, 2017

The Gupta Leaks reveal more KPMG-audited transactions in which the Guptas appear to have laundered money into South Africa, with much of this purloined from the government.

KPMG greenlighted three Gupta deals that bore multiple hallmarks of money laundering. In these, suspicious foreign entities paid millions for shares in dormant local shell companies. Our investigations suggest at least two of the transactions were a cover to bring dirty money home.

KPMG audited the Guptas’ Oakbay Investments when it received the money, around half a billion Rand. The deals were specifically described in Oakbay’s audited financials.

KPMG had enough evidence to see that something was wrong, the deals appeared to be fake, as we will explain, yet it did not qualify its audit opinions. The money was mostly sourced from Transnet kickbacks and provincial government funds.

There is no evidence KPMG knowingly participated in corrupt schemes. It audited about 30 Gupta companies in South Africa, but not their offshore vehicles, meaning it would have struggled to discover the ultimate source of the money. But the new evidence will underscore public concern that KPMG may have looked away while illicit funds flowed under its nose.

KPMG denied that it “facilitated” corruption. It said it was taking responsibility and “will comply with all our reporting obligations.” It declined to comment on the specific transactions.

The Guptas did not comment for this article. They have consistently declined to comment on #GuptaLeaks allegations but said the leaked data was fake and they did no wrong. KPMG South Africa is in a precarious position, thanks in part to its work for the Guptas.

In June, we reported how KPMG audited a South African Gupta company when it received Free State government money, diverted to pay for a lavish Gupta wedding.

KPMG South Africa’s then chief executive and its audit partner on the Gupta account attended the wedding. They later sent ingratiating emails to the Guptas that suggested an all-too-cosy relationship. We then reported how a senior KPMG partner helped the Guptas to establish Dubai companies that would avoid South African taxes by pretending not to be Gupta associated.

KPMG said this tax structure was “within the parameters of the law.” But the allegations sparked an ongoing public backlash, and KPMG South Africa has lost numerous prominent clients.

In September, KPMG International announced the results of an investigation. It found that the firm had not shown enough “professional scepticism” and its work “fell considerably short of KPMG’s standards.” KPMG’s country chairperson, top six South African executives and the Gupta account audit partner resigned.

--News24--

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