KPMG Opaque Dealings: Fraud, Corruption,Yet It Remains Banked

Published Feb 4, 2024


By Feroza Petersen

In the world of financial auditing, transparency is not just a virtue but a fundamental necessity to maintain trust.

However, the recent conclusion of the lawsuit between KPMG South Africa (KPMG) and VBS Mutual Bank, has left many questioning the commitment to transparency within the firm. The legal battle, due to KPMG’s alleged role in facilitating fraud and corruption, raises concerns about the accountability of one of the world’s leading audit firms.

KPMG, who have controversially signed a secret agreement with VBS Mutual’s liquidators, has been accused of turning a blind eye to alleged money laundering between Gupta-linked companies, allowing them to finance a lavish R30 million family wedding in 2013. Subsequently, KPMG International initiated an independent investigation into its local operations.

The firm has also faced criticism from the South African Revenue Service (SARS) for its involvement in a report on the “rogue SARS unit”, leading to the targeting of former officials, including ex-finance minister Pravin Gordhan.

Despite these controversies, most of South Africa’s “big banks”, except for FirstRand, continued their association with KPMG, either actively reviewing their relationships or awaiting the conclusion of ongoing investigations. This decision seems perplexing, given the serious allegations against the audit giant.

It is also at odds how these very same banks have treated black-owned businesses like Sekunjalo, where they have moved to close accounts. The banks’ repeated claims of “reputational damage” ring hollow in the face of their association to KPMG, particularly when the auditing firm has been found guilty in a court of law; Sekunjalo has not.

KPMG causes reputational damage; Sekunjalo does not. KPMG has conducted an auditor disciplinary process: Sekunjalo has not had the need to do so.

Again, the questions – why is KPMG still banked? Are there different strokes for different folks?

VBS Mutual Bank’s liquidators sued KPMG for damages initially estimated at over R860 million. The liquidators cited four key breaches, accusing KPMG of failing to conduct the VBS audit diligently, breaching the Auditing Profession Act, neglecting to escalate issues to relevant authorities, and alleging a lack of independence by the audit partner, Sipho Malaba.

The confidential nature of the ensuing settlement has raised many eyebrows, especially considering the public interest in the case and KPMG’s commitment to transparency since 2019.

The clandestineness surrounding the settlement contradicts KPMG’s promises of democracy and transparency.

Difficulties now also arise about the efficacy of the firm’s internal reforms and the depth of its commitment to institutional change considering this latest development.

With concerns about excessive wealth influencing laws, support for Trade Unions seeking full disclosure of the matter, has grown.

While KPMG states it is working with regulators to address legacy issues, the public remains sceptical. The confidentiality of the settlement with VBS raises questions about whether the firm is truly learning from the VBS debacle or merely trying to sweep it under the rug.

The lack of clear answers underscores the need for a thorough examination of the relationship between financial institutions, powerful corporations, the State and where they fit in the rule of law in South Africa.

* The views expressed do not necessarily reflect the views of IOL or Independent Media.