Legal
South African Bank Fails to Prevent Private Clients Being Named
South African private bank FirstRand failed to prevent a South African magazine from revealing details of customer offshore accounts from its former private banking arm, Ansbacher Trust, after the High Court in Cape Town dismissed the bank's application for a gagging order.
FirstRand had brought an urgent application for an order interdicting and restraining Chaucer Publications, the publisher of investigative magazine Noseweek, and its editor Martin Welz from selectively publishing the names of clients who had offshore trusts through its former private bank, Ansbacher.
FirstRand argued that it was not seeking a gagging order but to protect the identity of its clients. It also sought, through a class action on behalf of unnamed clients, to prevent being defamed any further.
But deputy judge president Jeanette Traverso made it clear that section 38 of the constitution, on which the bank relied, was not meant for situations like the one in which the bank found itself.
Mr Welz said that although he would target the very rich and publish the names of the FirstRand clients who he alleged had benefited from offshore tax structures, he would not publish recklessly. He would publish only after he had done a proper investigation to match a name to an offshore trust.
In several articles since its June edition, Noseweek has claimed that FirstRand, through Ansbacher, had constructed schemes for clients who had offshore discretionary trusts, including the so-called loop structure, to evade paying tax in South Africa.
He alleged that Ansbacher and its clients had engaged in a criminal conspiracy to defraud the fiscus and the revenue service. The bank has denied this allegation.
The identity of FirstRand clients is also under threat from another source. Tax consultant Barry Spitz and his company, International Law & Income Tax Institute, is suing FirstRand for disputed commission of as much as ZAR77 million ($11 million).
He claimed, via an advertisment in Business Day newspaper, that on the first day of his company's hearing, the names of relevant FirstRand clients would be available to all the authorities investigating loop structures, offshore trusts and tax and exchange control transactions.
