Sasfin offices in Johannesburg. The damages claim is a significant threat to the going concern of Sasfin considering that the company’s market capitalisation is just under R700 million. Picture: Bhekikhaya Mabaso/ Independent Newspapers
Sasfin Holdings’ share price plunged nearly 12% in intraday trade yesterday after the financial services firm denied liability for nearly R4.9 billion damages instituted against it by the South African Revenue Service (Sars) over allegations related to money laundering and bribery by former employees and clients of its banking business.
Sasfin’s shares hit an intraday low of R19.00, later closing the day 7.1% lower at R19.98 and year to date, 13.96% down.
This comes after Sars yesterday confirmed that it had slapped Sasfin with nearly R4.87bn fine, plus interest and costs.
In a strong rebuttal, Sasfin CEO Michael Sassoon said the legal opinion was unequivocal that the claim fell outside of the recognised parameters of applicable law and had a very remote likelihood of success.
The damages claim is a significant threat to the going concern of Sasfin considering that the company’s market capitalisation is just under R700 million.
Sars Commissioner Edward Kieswetter confirmed legal proceedings against Sasfin Bank yesterday.
This summons, dated January 9, 2024, arises from Sars’ inability to collect income tax, value added tax and penalties allegedly owed by former foreign exchange clients of the bank.
The Sars’ claim relates to the expatriation of money going back to 2014, in which a criminal syndicate colluded with former employees of Sasfin who were operating outside of their scope and authority of employment.
Evidence found by Sars suggests that Sasfin employees played a pivotal role in facilitating the multibillion-rand transnational plunder network run across South Africa’s borders.
Sars investigators found about R3bn in illicit tobacco money was surreptitiously and illegally washed through a Zimbabwean tobacco company’s Sasfin accounts during the 2017 and 2018 financial years.
Former foreign exchange clients of the bank operated as a syndicate that ran an unlawful scheme to facilitate the expatriation of money out of South Africa and colluded with former employees of the bank who operated outside the scope of their employment.
The bank took decisive action when it became aware of this unlawful scheme, including instituting an expanded investigation led by an independent forensic consultancy.
This resulted in the termination of relationships with the implicated clients and employees and the opening of criminal cases against them.
Sasfin rejects Sars’ claim
Sasfin, the bank and wealth management company, said it firmly rejected the Sars’ claim and leading local legal experts had advised that the summons had a very remote likelihood of success.
Sasfin yesterday said it had engaged with the relevant regulators in a transparent manner subsequent to receiving this summons, and obtained a legal opinion from law firm ENS, authored by Professor Dale Hutchinson, Professor Michael Katz, and Aslam Moosajee, and endorsed by Advocate Wim Trengove SC.
Sassoon said, “We are confident that the Sars claim has no merit. We have filed a notice of intention to defend the matter, which we will do rigorously. It is unjust for banks to be held liable to Sars for taxes that their clients have failed to pay.”
“Of importance is that this is not a tax claim, but a claim for damages and has nothing to do with Sasfin’s own tax affairs. The claim, which we emphatically reject, will involve a protracted trial action, and the matter is only likely to conclude in several years’ time.”
Sasfin said it has concluded that the claim would not result in the recognition of any liability and that it had no effect on its capital position.
The board of directors of Sasfin Holdings were of the view that Sars’ claim had no merit and has little chance of success.
The bank said it would, therefore, defend the claim, and given that this involved a defended trial action, the matter was only likely to come to trial in several years’ time.
Meanwhile, Sars said it had conducted a thorough investigation into various South African taxpayers who had not made true and accurate tax disclosures to the revenue collector.
Sars said the investigation revealed that the taxpayers had colluded to expatriate funds offshore in a manner that obscured tracing the expatriated payments and jeopardised the recovery of tax in South Africa.
“The Commissioner’s position is that it is inappropriate to comment on the question of liability and compensation for the fiscus’ loss, as these are legal issues that are now before the South African judicial system,” it said.
“The Commissioner wishes to affirm his commitment to pursue the enforcement and recovery of taxes without fear, favour or prejudice in the interest of upholding the fiscal integrity of the South African tax system.”
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