Chinese laundry


South Africa pockets R190m illegally destined for Beijing.

Just 11 days before Christmas the SA Reserve Bank declared R192 million of “tainted” China-bound money that had been seized from the bank accounts of a Sandton currency-exchange business, forfeited to the state. The money had been deposited there more than five years ago by scores of local Chinese business people, many using false identities and forged bank documents, in an attempt to send their undeclared millions back home, under a cloak of anonymity.

They had somehow been led to believe that Ace Currency Exchange (Pty) Ltd – owned by a Zambian with a history of shady dealing on the continent – offered a means of repatriating their funds to China under the radar of exchange control regulations.

This story reveals the ease and confidence with which anyone can move ill-gotten gains out of or into South Africa through currency exchange  businesses on the assumption that, even if caught, no one will be punished.

Despite prima facie evidence of currency exchange violations, forgery, fraud and possibly money-laundering, the state appears to be in no hurry to prosecute the Ace Currency Exchange (Pty) Ltd based in  Fredman Towers, Sandton or any of its more-than 100 Chinese clients fingered in the scam.

Instead in March, the Financial Intelligence Department of the Reserve Bank, reaffirmed Ace’s licence when it released a document titled “Currency and Exchange Guidelines for Consumers” which helps consumers make informed decisions when choosing a currency exchange provider. 

The Reserve Bank, despite numerous requests, refused to provide any information. Noseweek’s requests for substantive reasons as to why they seized the money and when they were going to prosecute, were ignored.

Attorney Yao-Heng Sun, now a senior official in Joburg mayor Herman Mashaba's office

An official privately suggested to Noseweek that by seeking prosecution of what are obviously (judged by the amounts involved) middle and upper-class Chinese nationals living in South Africa, they might “annoy Beijing”, something South African bureaucrats are terrified of doing.

The cash was seized through a “blocking order” issued by the SARB on nine bank accounts owned by Ace between July and October 2011. Ace had only been licensed to trade for just over a year by this stage – and their licence was limited to providing foreign currency allowance permitted to bona fide travellers with passports and valid air tickets. 

On 16 December 2016, a public holiday, a Government Gazette notice was issued by deputy Governor of the Reserve Bank, K Naidoo, a “decision to forfeit to the State… the capital amount of 
R192,362,975.67”. Which might explain why the event went unnoticed by the media.

The R192m was deposited into the National Revenue Fund, where it is no doubt much needed in these days.

At the helm of Ace is Paul Steele, well known for his links to central African leaders including the Zambian political elite such as former and now-disgraced Zambian President Frederick Chiluba.

Steele, pleading innocence and ignorance, told Noseweek he had no idea why the money was seized or why it was forfeited.

“They [SARB] blamed everybody and didn’t listen to any reason. At one point they proposed a settlement, we went for the follow-up meeting and then they said the settlement was off the table. It’s a long, long story,” said Steele speaking from London.

Traces of the dispute were found at the Pretoria, Johannesburg and Durban high courts.

• In Johannesburg in 2011 – as the money was being seized – three Chinese nationals, Shuai Yuai Ma, Bo Qian and Kai Che,  claiming to represent 80 others, tried unsuccessfully to secure an order to have R131,724,328 returned and placed in the trust account of Sandton law firm Thomson Wilks Incorporated.

• In Pretoria in 2014 at least 108 Chinese claimants (it is unclear if this includes the 80 from the 2011 application) unsuccessfully pleaded with the court not to extend the “blocking order” which allowed the Reserve Bank to hold “tainted” funds for up to 36 months at a time. This was the third extension allowed to the bank which legally allowed them to hold the money until 31 December 2016. 

Ace filed a notice in this application stating that it would “abide by the decision of the court” and that “Ace claims no prejudice and does not contend that it would be adversely affected by an extension order”.  It clearly had no intention of backing its clients in this one.

• The third case referring to Ace was lodged in Durban in 2015 and was heard in February 2017. A Durban-based Chinese businessman was disputing the allegedly exorbitant fees that his South African Chinese lawyer-turned-DA-politician had charged him for representing him in an unsuccessful bid to recover his seized millions.. 

Portions of these court documents seen by Noseweek reveal that Ace Currency Exchange, an “authorised dealer with limited authority (ADLA)” only allowed to “facilitate travel exchange” excluding “immigrants’ travel”, allegedly lied to its clients that it could transfer any amount to any account of their choosing, breaking all exchange control regulations. 

But while the claimants have claimed innocence, they only ever entered into oral agreements – presumably sealed with a handshake – with Ace agents before depositing amounts ranging from R160,000 to R1,9m-and -higher into the company’s South African bank accounts with verbal instructions that it be transferred to a bank of their choice in China.

If the client was given a bank deposit slip, it made no reference to the client’s name or source of the money. Ironically, this made it impossible for them to prove ownership of the money when they attempted to reclaim it after the scheme went wrong.

Shortly after the 2011 seizure the Reserve Bank moved the money to an entity controlled by the Reserve Bank known as Corporation of Public Deposits (CPD).  This freed up Ace’s accounts and they have been happily trading again ever since. 

When Noseweek asked Ace’s Paul Steele if he feared prosecution, he said:  “No I don’t think [SARB is] going to [press charges]. We came to a settlement with them but later on we found not one single person got their money. Not one [person] was refunded,” said Steele.

Andre Malherbe, an investigator in the Finance Surveillance Department told the High Court in Pretoria in October 2014, when SARB applied to extend the blocking orders, that the “relevant underlying documentation kept by Ace… was prima facie suspicious. Several documents appeared to have been altered or falsified”.

Malherbe said the “electronic transfers of funds to China were fraudulent and that a significant number of the applications for transfer of the foreign exchange were made by or on behalf of fictitious persons or persons who were not present in South Africa at the time of making the applications”.

On the available evidence only a small number of the Chinese nationals involved in the scam were travelling at the time.

Malherbe said his views were “corroborated and confirmed by a preliminary forensic report issued to the SARB on 28 July 2011”. This report he said was secret and protected by “Section 33 of the SARB Act”.

 “Some of the [Ace] agents allegedly did not inform their clients of the fact that Ace was only authorised to do travel-related foreign exchange transactions. The clients allegedly understood that the agents had ‘a right through Ace to transfer funds’.”

He said SARB did not accept that the Chinese nationals had any claim on the cash but only a contractual claim against Ace. 

When Steele was asked by Noseweek whether he would be held liable by the Chinese nationals he said “No, I am not actually.”

Noseweek called Ace’s offices in Fredman Towers and made several attempts to speak to the Acting MD Sizwe Dlamini.

When he was finally reached he suddenly had a meeting for the rest of the day and said he would call back later. Further attempts to reach him were unsuccessful.

Malherbe said they had invited the clients to make make “full and frank disclosures” and were “flooded” with “representations and disclosures voluntarily made by clients and their legal representatives.”

“By mid-2012 the quantum of the claims submitted exceeded the amount paid into the CPD account. 

“It became apparent that a significant number of deposit slips were submitted several times by different claimants. In numerous instances the deposit-slips did not identify the person who deposited the money.”

He said adverts were also printed in local papers, “including a newspaper circulated in the Chinese community” asking genuine claimants to come forward.

“The first advertisement was published on 23 December 2012 with a deadline to respond by 28 February 2013. There was a limited response and a second advertisement was placed during January 2013. Some 234 persons responded and expressed an interest in the money.”

He said a panel was established to deal with the claims and claimants were asked for additional details such as source, details of the transaction, proof of address, and proof they paid taxes. At that stage many withdrew.

“The majority of the claims related to the transfer of funds by Chinese nationals to banking accounts in China in contravention of Exchange Control Regulations. Only a limited number of the transaction concerned the granting of foreign exchange for bona fide travel purposes and were based on authentic documents. The department was satisfied that, not only Ace, but also the claimants contravened the exchange control regulations.”

Judge Eben Jordaan, ruling in SARB’s favour said: “Blaming Ace offers no excuse. The claimants themselves contravened the Regulations”.

To prove his point he cited a letter entered into the record by Marais 
Attorneys which said “Our clients came to South Africa with the main purpose to earn money to support their families in China”.

Jordaan added: “Significantly, the Respondents neglected to point out to the Court that only two Claimants submitted complete responses to the SARB (for full disclosure)”.

During this matter 78 Chinese claimants laid claim to R28,060,098 while Marais Attorneys who represented at least 28 people claimed the majority of the R192 million.

Some claimants filed statements with the court in support of their action.

One such claimant was Zhenggang Liu believed to be in the export-import business and based in Cyrildene, Johannesburg. Liu said he “concluded an oral agreement, in terms of which [Ace] undertook to provide foreign currency services to [him]”.

Represented by David Bayliss Attorneys, Liu said that the oral agreement, on which Ace would charge a “0,5% plus Vat” fee,  stipulated that Ace would deposit his currency into another foreign account in China prior to Liu’s flight to China. Liu deposited R510,000 into Ace’s Absa account.

A Durban Chinese couple also lodged a submission. XIaoting Liu and his wife Wei Juan Cai, who run a business at the Oriental Plaza on Anton Lembede (Smith) Street, Durban Central, claimed to have lost collectively R906,060 in the seizure. They claim they did go to China for a visit. He contracted Yao-Heng Sun, of Sun Attorneys to fight his cause. Sun has since become a Democratic Alliance politician and is a member of mayoral council in Johannesburg heading up the Public Safety portfolio.

But Liu and Sun are now involved in their own legal dispute over fees, being heard before the High Court in Durban.

Despite no recovery, Sun billed Liu and Cai R513,141.15, about 56% of the value of money they had forfeited to the State.

Sun had initially, in October 2015, obtained an order to seize Liu’s property in payment of his fees, but this order was overturned in February 2017.

The dispute is over what kind of agreement they entered into. Liu maintains it was a no-win no-fee arrangement where Sun was entitled to 22% of what was recovered (which is illegal in any event) while Sun confirmed the 22% win fee but said this excluded the paying of “advocates and professional persons charges, travelling and photocopying” – which is the bulk of all legal costs.

Noseweek has learnt that an out of court settlement is now being negotiated.

Some of the other depositors were Xiaoming Wei (R1.12m), Xiaoping Wei (R1.23m) as well as Zeping Yang  (R1.16) and Daizhong Zhu (R1.16m).

Steele’s stellar background

Zambian Paul Steele was and may still be in business with Congolese businessman, former Katanga governor and DRC presidential hopeful Moise “Moses” Katumbi.

 Katumbi was sentenced in the DRC in June 2016 for illegally selling a property not owned by him. This was largely seen as a politically motivated incident.
 
Steele and Katumbi were fingered for importing maize and distributing it during 2001 Zambian presidential elections for the benefit of the ruling party.

Another company, according to Zambian media, linked to Steele was C & S Investments. It was reported that this was one of 28 businesses created by the Zambian government as a conduit to funnel cash to the MMD.

Steele is a benefactor of the MMD.

Steele told Noseweek that, despite the list of accusations, he has not been convicted of any crime. Instead his business interests have expanded. 

Steele and his currency exchange partner, South African Brenda Sakala, opened Ace Global Currency Exchange Limited in 15 January 2016 in London. In South Africa, the pair have launched several companies from cash services to trucking, export and import and project management.

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