On 16 October 2020 André Malherbe, an investigator at the South African Reserve Bank’s Financial Surveillance Department, got a phone call from one of the country’s best known alleged money launderers.
Ahmed Bhorat, widely known in his rather specialised trade as “Bullshit Bertie”, wanted to cut a deal.
He could provide information in relation to a major ongoing investigation the central bank had internally dubbed Project X-Ray. This investigation, which we reported on previously, revolved around a dizzying scheme to simultaneously launder money abroad through 26 different entities, mostly fly-by-night companies seemingly created for the operation.
Bhorat himself had been identified as a 27th exit point for this scheme, which sent roughly R700-million, mostly to Hong Kong, between late 2016 and mid-2017.
To be fair, Bhorat was in a bind.
A R46-million tax bill had forced him into insolvency, the latest setback in a career spanning back to the 1990s. He was previously convicted on a plea deal for creating fake import documents.
A first report by the trustees of his insolvent estate noted that Bhorat “has not co-operated with the Trustee’s requests for books and records relating to his affairs and alleges that no such information exists”.
Bhorat also “contravened numerous provisions of the Insolvency Act, namely…Concealing or destroying books or assets…Concealment of liabilities or pretext to existence of assets…Failure to keep proper records [and] Failure to give information or to deliver assets, books etc.”
In court papers the trustees later noted that Bhorat “has proven himself to be a habitual perjurer who trims his sails to the wind in whichever way suits him best”.
And to make things worse, the trustees soon found themselves fighting the South African Reserve Bank (SARB), which wanted to seize the money in Bhorat’s accounts for exchange control violations. The trustees wanted to put this money into the insolvent estate to pay creditors, mainly the South African Revenue Service (SARS).
In court papers the trustees later noted that Bhorat “has proven himself to be a habitual perjurer who trims his sails to the wind in whichever way suits him best”.
An inquiry was held by the trustees between 2018 and 2020, during which, judging by transcripts, Bhorat presented himself as a somewhat bumbling businessman down on his luck, unable to account for some R201-million he had paid abroad for a bizarre array of goods – allegedly always on someone else’s behalf.
But then Bhorat had a change of heart and abruptly confessed that everything he had said up until then was, as his nickname suggests, bullshit.
The real story, Bhorat confessed in an affidavit provided to the SARB, was that he assiduously fabricated paperwork for all the money he sent abroad under the guise of advance payments for imports.
He also had an inside man at SARS who helped him with this, although the affidavit did not identify this individual.
In order to piece this story together, AmaBhungane has obtained the full record of the investigation into Bhorat’s affairs, a separate SARB investigation implicating Bhorat and data on a range of offshore entities.
The scheme run by Bhorat was already complex in its own right, but as we will see, it slotted into a vast laundering machine, small parts of which we encountered in previous instalments of this series.
Bhorat’s bullshit factory
The Bank of Athens accounts functioned as a pitstop between a group of obscure South African depositors on one end and a number of Hong Kong – and to a lesser extent Turkish – recipients on the other: a classic pooling exercise in the vocabulary of money laundering.
Between September 2016 and June 2017 “Bullshit Bertie” operated two accounts at what was then the SA Bank of Athens (later Grobank and then Access Bank). The extent of the bank’s knowledge of the scheme is something we deal with below.
This was not his first rodeo, Bhorat having entered into the aforementioned plea deal with SARS back in 2003 and then in 2015 finding himself at the receiving end of the R45-million tax assessment.
The Bank of Athens accounts functioned as a pitstop between a group of obscure South African depositors on one end and a number of Hong Kong – and to a lesser extent Turkish – recipients on the other: a classic pooling exercise in the vocabulary of money laundering.
According to Bhorat, he would receive the payments from the obscure entities (discussed below) in the mornings, alongside text messages instructing him where to send them. His job was to fabricate paperwork to make it seem that he was making payments for imports, often of rice.
He would ostensibly be importing goods under the trading name R&R Traders and Brokers.
We have copies of 178 of these invoices, which Bhorat churned out at a rate of one every two days.
The “imports” included bicycles, cameras, building materials, rolling door motors, protective clothing, leather jackets, lighting fixtures, shoes and rice – lots of rice.
Contacted by phone, Bhorat told us that he believed at the time that the money really was for the import of goods, but that the scheme involved under-declaring the value of goods to dodge customs duties.
This is much the same as what he was doing when he first got in trouble with the authorities more than two decades ago.
He also repeated the claim that he has no idea where the payments actually came from and knows nothing about where the money went because he was simply given the details in order to execute payments in return for a commission.
Despite his many years of experience, however, Bhorat was not always perfect at this job.
Sometimes the same company would, incongruously, be providing many of these disparate goods and sometimes different companies would invoice for the same item on the same day. In some cases, successive invoices from a company would unaccountably have slightly different letterheads.
Besides, Bhorat insists, he was just a pawn.
The “main guy” sending instructions was one Fawz Yousuf who, along with his partner Ridwaan Loonat, were set up with Bhorat by a family member, he claimed.
“I never knew anything…I know I didn’t do the right thing [but] I never knew Fawz and I only knew Loonat a little because we’re from the same West Rand township.”
The fuel traders
Yousuf and Loonat appear to have been intermediaries themselves, but it is not clear whether their own money was mixed with the other funds they allegedly arranged for Bhorat to expatriate.
What is known is that Yousuf and Loonat are involved in the regional fuel trading industry through their Finergy group of companies, with operations in South Africa, Mozambique, Zambia, the DRC, Tanzania and Malawi.
They are also purportedly the founder and CEO respectively of a supposed Saudi-Arabian linked joint venture named KBI-Finergy, although documents setting out the leadership and structure of KBI-Finergy were removed from the internet following amaBhungane’s inquiries.
Meanwhile KBI, which is based in the United Arab Emirates, not so long ago hosted a delegation from South Africa’s state-owned oil and gas company PetroSA.
Although it is not clear that the meeting included representatives from Finergy, PetroSA confirmed to us that the meeting was with “KBI-Finergy” and that the parties had been introduced by Nako Energy.
Attempts to seek clarity from Finergy, KBI and Nako were unsuccessful.
Closer to home, Finergy was a central element in a corruption scandal in Malawi involving Newton Kambala, the country’s former energy minister, and Chris Chaima Banda, an advisor to the president. It was alleged that they had meddled in the awarding of a fuel supply contract by the National Oil Company of Malawi in order to ensure that Finergy won.
“I created the pro-forma invoices. I created pro-forma invoices and I was paying them [offshore companies] via pro-forma invoices, ok.”
In Bhorat’s version, Yousuf and Loonat also sent millions of rands offshore illicitly while he earned a commission of 60 South African cents per dollar for greasing the wheels.
Despite initially acknowledging messages and providing an email address for us to send questions to, Yousuf never responded to questions.
Loonat was untraceable and amaBhungane understands he is living in Dubai.
According to the transcription of a “without prejudice” meeting with the trustees of his estate, Bhorat explained the setup:
“I created the pro-forma invoices. I created pro-forma invoices and I was paying them [offshore companies] via pro-forma invoices, ok.”
He claimed that the details of the offshore recipients and the amounts that needed to be paid would be sent by Loonat.
“Nah they would just text it to me. This Ridwaan and they would text me, they would just send a text message.”
The use of fake pro-forma invoices is a ubiquitous practice in the illicit financial system. These invoices are given to banks alongside orders for foreign currency and according to South African exchange control rules, the “importer” has four months to prove whether anything was in fact imported.
A key compliance gap opens up if Bank staff willfully or negligently fail to follow up on this.
At Bank of Athens things appear to have been particularly dire. At the Bhorat inquiry the bank’s surveillance manager Janine Cassidy testified that the bank’s system was entirely manual at the time, with bank employees essentially having to remember who owed the bank paperwork.
SA Bank of Athens (now Access Bank) only instituted an automated follow-up system around 2018.
Bhorat was “one of the reasons” this was done, Cassidy said.
“So it was more human intervention at that time and obviously [it] wasn’t working correctly.”
While there is no evidence of the bank knowingly participating in Bhorat’s scheme, Cassidy’s testimony suggests that there were, at the least, some shortcomings in its oversight.
Even if the bank had followed up, however, there were fake documents waiting to justify transactions. When needed, fake import documents would be created by the offshore beneficiaries, Bhorat told the trustees.
“So, they manufactured the bill of entry, the arrival notification, the invoice, they created everything [and] sent it to me.”
“Go to the shipping lines, those container numbers don’t exist.”
What does exist, however, is a window onto the vast international system used by a variety of South Africans to illegally move money offshore.
Across the sea
Hong Kong’s role in global money laundering is legendary.
Bhorat’s operation, an even less significant drop in this ocean, was nonetheless already complex and clearly overlapped with other operations in South Africa.
An internal report produced by HSBC in 2017 to establish the global bank’s exposure to Gupta-related money laundering revealed the staggering scale of the wider Hong Kong networks.
A subset of 60 (out of 203) entities with HSBC accounts that channelled Gupta money were multi-purpose laundering fronts that together received a staggering $4.2-billion from different sources. The Gupta contribution was a fraction of a percent.
As a measure of how complex this system is, HSBC established that these 60 entities had made onwards payments to 5 576 different bank accounts for their various clients. This is from a small group of companies from only one bank.
Bhorat’s operation, an even less significant drop in this ocean, was nonetheless already complex and clearly overlapped with other operations in South Africa.
AmaBhungane has comprehensive records for the transactions through which he expatriated money for, he claims, Yousuf and Loonat.
Money came in from a few dozen domestic sources (which we will get to) and flew out to a total of 62 different offshore entities. While the majority were in Hong Kong, at least two were in Türkiye.
And while Bhorat’s invoices were fake these companies were real, at least in the sense that they were registered and had bank accounts. And, like the ones HSBC had looked at, they tended to have more than one client.
As in our previous instalments, the data we have on Bhorat shows how the same Hong Kong entities served several South African clients at once, including in the large-scale laundering system surrounding the Gupta brothers, but also in other cases, acting as a kind of index.
Among the 62 offshore entities Bhorat sent money to, at least nine were also channels for South Africans who in some way or another helped launder the proceeds of state capture, as identified in a report produced by Shadow World researcher Paul Holden for the Zondo Commission.
Notable entities included Success Stand Limited, Honourway Garment and Shun Shi Limited, which were also identified in the HSBC report mentioned earlier as part of a laundry system related to the Guptas.
Companies belonging to local Ashok Rajwani – which facilitated the offshore dissipation of funds for a 2% commission (touched on in a previous instalment) – also feature.
Perhaps more important than where the money went, however, is where it came from
Feeders
A wide array of individuals and obscure companies paid money to Bhorat for on-payment abroad (allegedly via instructions from Loonat and Yousuf). Some payments were very telling.
First off, there were 61 cash deposits totalling over R22-million.
One small but significant apparent user of the scheme was Amir Sabir, then the head of investments and treasury at the notorious Habib Overseas Bank – a bank implicated in several money-laundering schemes that was recently liquidated.
We made contact with Sabir, but he failed to respond to questions.
Another source of funds was Mohamed Bamath, another veteran of the illicit financial sector who has a long history with Bhorat. Specifically, Bamath was the mastermind behind the 1990s scheme that saw Bhorat accept a plea deal. Bamath himself pleaded guilty to 81 tax-related counts. Bhorat seemingly surreptitiously moved around R20-million out of the country for his old colleague.
We were not able to reach Bamath.
A number of other implicated individuals went to ground after initially agreeing to receive questions.
Other entities feeding Bhorat’s accounts were largely obscure companies with hard-to-find directors.
Weaknesses in the system
The doubts expressed over the state of SA Bank of Athens’s checks and balances raise the question that has run through this series: the potential complicity of the “legitimate” financial sector in operations directed from the underground.
Our evidence suggests that most South African banks, in particular smaller banks, have perhaps unwittingly been a conduit for illicit offshore capital flows.
The alleged outright collaboration of certain former Sasfin employees with suspected money launderers has made Sasfin a particularly infamous case.
However, our evidence suggests that most South African banks, in particular smaller banks, have perhaps unwittingly been a conduit for illicit offshore capital flows.
The now-liquidated Habib Overseas Bank is a glaring example, canvassed in our previous reporting, but in our investigations we have also found large-scale operations embedded at other banks.
Part of the problem is the extremely lax policing of the two main points where bad actors could be caught.
These points are one: the original onboarding of clients who clearly are not legitimate businesses and cannot justify having often hundreds of millions of rands to send abroad and two: the actual paperwork for sending the money offshore (like the invoices mentioned above).
An internal report produced by Nedbank’s Group Financial Crime and Forensic Services division (at the SARB’s behest) illustrates the kinds of weaknesses that may exist even at major financial institutions. The report was included in court documents in the SARB’s battle with the trustees of Bhorat’s estate.
Up until 2018, the bank’s Global Payments Operations “environment” essentially involved six people, each with a portfolio of specific clients apportioned alphabetically. Employee A would, for instance, deal with all the clients whose names start with the letters A through F.
Rather than considering the damage that may be done to the country, this department functioned on the basis of what “the financial impact the staff members’ actions might have had on Nedbank”.
When it comes to “financial impact”, the earning of fees on trading hundreds of millions of rands for dubious clients does not make a case for extreme vigilance.
“In the case of the six individuals managing advanced payments there was consequentially very little oversight,” Nedbank concedes in its report.
While clients enjoy having one point of contact, this system “also created the risk that a staff member forms such a close relationship with a client that transactions and related supporting documents are not considered with the required vigilance”.
In a case flagged by the SARB this is seemingly precisely what happened, with the relevant employee rubber-stamping dodgy paperwork in order to expatriate over R100-million for one of their assigned clients.
This employee was disciplined and “removed from the position,” while Nedbank said that it had instituted random checks on transactions and the rotation of who deals with which clients.
It stopped well short of admitting that anyone intentionally did anything wrong.
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