South Africa must seek damages from KPMG over bank fraud- Central Bank

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A published investigation by South Africa’s central bank reveals the country should seek damages from global auditor KPMG, for the role it played in a corruption scandal that facilitated the loss of at least $130 million from the local bank VBS.

KPMG has lost more than a dozen clients, as questions have been raised about the company’s ethical conduct in the country. The probe, which was commissioned by the South African Reserve Bank (SARB), is being carried out by a team of lawyers and forensic investigators.

To restore the reputation of its South African business, KPMG announced changes to its corporate governance. The company acknowledged it had seen the investigation’s publication, but said in a statement that “we will only be in a position to comment once we have studied the full contents of the reports”.

Terry Motau, who led the VBS probe, recommended that criminal charges be brought against the individuals and entities who implemented and benefitted from the VBS theft.

Motau’s investigation report, titled “The Great Bank Heist” was published on the SARB website. In the report, he said “I recommend further that an auditor’s liability claim be instituted by the Prudential Authority, the curator and the National Treasury against KPMG for recovery of their respective damages”.

Motau did not specify how much the state should seek in damages from KPMG, but said the scale of looting from VBS would not have been possible had KPMG not signed off on the bank’s financial results. Two KPMG partners who had dealings with the bank, Sipho Malaba and Dumi Tshuma, were forced to resign after failing to disclose financial interests in VBS.

The probe led by Motau discovered that VBS actively sought to attract deposits from municipalities and other state entities and bribes were paid to solicit the money. The investigation also revealed bribes were paid to buy the silence of people who became aware money was being stolen.

 

 

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