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Finance minister Mboweni lets rip at KPMG over role in VBS Bank heist

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Things aren’t going well for KPMG South Africa, which has suffered an exodus of key clients, while others are reviewing their association with the scandal-ridden accounting firm. Now finance minister Tito Mboweni has climbed in, telling Parliament’s standing committee on finance: “When you have a big auditing firm failing us in the manner that one has, that is a serious concern.”

KPMG signed off on the financial statements of VBS Bank, now under curatorship and the subject of a damning report detailing large-scale theft of funds.

Among the companies to cut ties with KPMG are AVI, Munich Re of Africa, Sasfin Holdings, Sygnia Asset Management and Hulisani. KPMG provided audit services to the Gupta-owned Oakbay Resources and Linkway Trading. Three of SA’s major banks, including Absa Group, are reviewing contracts with the audit firm.

We were failed by internal and external auditors

“In this case I think we were failed by both the internal auditors and the external auditors. It seemed to have been part of the heist,” said Mboweni, in a report by Polity.

According to the report authored by Advocate Terry Motau, former KPMG partner Sipho Malaba was rewarded R28-million by those who plundered VBS’s coffers.

Mboweni, who served as governor of the SARB for ten years, suggested that the central bank should look at extending its onsite inspections at major banks to smaller banks to prevent a repeat of abuses such as those detailed at VBS.

“The central bank had a capacity for onsite inspection, at some of the big banks we had onsite inspectors. Looking overall at the experience … the central bank has to be very mindful of what they can do in terms of inspections,” he said.

Criminal proceedings should follow

Mboweni said he hoped that, in line with the call by Motau, there would be criminal proceedings against those who caused the failure of VBS through a brazen scheme of paying bribes to solicit deposits.

The finance minister added that political parties must act against their members found to have benefited from the fraud scandal.

Motau listed the brother of Economic Freedom Fighters chief whip Floyd Shivambu, Brian, among the individuals who gratuitously received millions of rands from VBS.

Media reports have suggested that Floyd Shivambu also received R13-million and the EFF R1.3-million. Shivambu has dismissed the reports as “weapons of mass deception”.

Reputational damage

KPMG’s reputation suffered extensive damage over its investigation into a “rogue intelligence unit” within the South African Revenue Service, which later turned out to have been a politically motivated fabrication.

Motau recommended that the audit firm be held liable for damages incurred by the VBS curator, the National Treasury and the Prudential Authority.

Financial Times earlier reported that KPMG will parachute in senior executives and cut hundreds of local jobs to rescue its South African business after a client exodus over a series of scandals, including the firm’s links to the Gupta business family who have been accused of serious corruption.

In June KPMG said that up to 400 people would leave the firm and some offices in the country would be closed in order to “take into account recent client losses and current levels of demand for certain services.”