16 Apr

KPMG South Africa Audits Own Staff After Breaking Public Trust

KPMG South Africa, which has faced scrutiny for its audit work on failed VBS Mutual Bank and companies linked to the politically connected Gupta family, said all staff face background checks every two years to try improve public trust in the firm.

“The vetting is to be done by an external, independent party,” Wiseman Nkuhlu, chairman of KPMG, told reporters in Johannesburg on Sunday. The firm will also extend a review of its past work to stretch back 18 months and set up a hotline for employees to raise concerns about the quality of KPMG’s work, he said.

Two of the auditor’s partners, Sipho Malaba and Dumi Tshuma, resigned this month after they were faced with disciplinary charges related to work done for VBS Mutual Bank, which collapsed in March after the lender was unable to repay some of its clients’ deposits.

The allegations against them included their failure to comply with the firm’s policies and procedures regarding the disclosure of relevant financial interests, KPMG South Africa said in an emailed statement on Saturday.

On the VBS work, “the disappointment and anger is palpable,” said Nhlamu Dlomu, chief executive officer of KPMG South Africa. If the two partners who quit need to be reported to the country’s authorities following the KPMG probe, the firm will take those steps, she said.

Last year, KPMG LLP’s South African unit appointed nine new executives in an attempt to restore trust in the auditing firm as clients distanced themselves over its involvement with the Gupta family.

The Guptas, who have fled South Africa, are accused of using their friendship with former President Jacob Zuma to win state contracts and influence government appointments. Zuma and the Guptas have denied any wrongdoing.

VBS, which isn’t listed, gained attention in 2016 when it gave Zuma a mortgage to settle a Constitutional Court order to repay taxpayers some of the money spent upgrading his private residence.

Source: https://www.bloomberg.com/news/articles/2018-04-15/kpmg-south-africa-putting-all-staff-through-background-checks 

13 Mar

South Africa’s VBS Mutual Bank Fails Amid ‘Severe Liquidity Crisis’

VBS Mutual Bank, one of South Africa’s smallest lenders, has been put into administration after it was unable to repay money owed to municipalities, according to the country’s central bank.

The management team has been relieved of its duties and a curator from the auditing firm SizweNtsalubaGobodo put in place following a “severe liquidity crisis,”  Lesetja Kganyago, governor of the South African Reserve Bank, told reporters on Sunday. Retail depositors’ money is guaranteed and VBS will stay open, he said.

VBS has operated as a licensed mutual bank, funded by its members, for 25 years, according to its website. The lender, which isn’t listed, gained attention in 2016 when it gave former President Jacob Zuma a mortgage to settle a Constitutional Court order to repay taxpayers some of the money spent upgrading his private residence.

The bank was fined 500,000 rand ($42,319) last year because of weaknesses in its control measures to prevent money laundering and combating the financing of terrorism.

“Eighteen months ago there was a significant increase in municipal deposits” at VBS, Kuben Naidoo, South Africa’s banking regulator, said in the same presentation. “It’s quite a risky strategy to take that money and lend it long term. When the municipalities came asking for that money, the bank wasn’t able to pay.”

The trigger that sent the bank into administration was its inability to honor an obligation to a municipality on Feb. 16, Naidoo said, without identifying the municipality.

Although VBS was asked to develop a plan, it became clear that its major shareholders wouldn’t be able to provide the amount of money the bank needed within a short space of time, Naidoo said.

VBS operates six branches across the country and calls itself a black-owned specialist corporate-finance and retail bank. VBS’s total assets were 2.4 billion rand at the end of December, according to the most recent central bank data. One of the biggest shareholders is the Public Investment Corp., Africa’s largest fund manager.

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