In the beginning of September, the financial services group FirstRand was charged of being involved in an illegal scheme that enabled rich South Africans to transfer money into an offshore company to bypass the taxman. FirstRand’s chairman Dippenaar, defending its company, admitted however that First National Bank had used its former private bank, Ansbacher, to create an offshore investment company whose sole purpose would be to warehouse investments of his clients. This setup, actually being quite legal, is commonly known as a loop structure – an investment by South African citizens and residents in offshore trusts that, in turn, reinvest the funds in South African businesses in which the original investors have a stake.
The Jersey-registered Ansbacher Group was acquired by FirstRand in 1992. Now the bank is known as multi-jurisdictional wealth management group, delivering tailored financial solutions internationally. In 1998, the government of South Africa announced the partial lifting of foreign exchange restrictions, which would allow citizens and residents to invest up to R500 000 in offshore structures.
According to Newsweek’s information, in June 1999 Ansbacher incorporated Duisberg Holdings in the British Virgin Islands, with its registered address at the offices of Ansbacher. An Ansbacher client in South Africa who wanted to make use of the new exchange regime, would set up an onshore trust, and Ansbacher would then establish a corresponding offshore trust for the client. Then the client would probably invest R500 000 in the BVI company, which would in turn make an interest-free loan to the offshore trust. This offshore trust would then invest the funds in the South African business in which the original investor had a stake.
It should be said that in July 2004 FirstRand had agreed to dispose of its interest in Ansbacher to Qatar National Bank, listed on the Qatari Stock Exchange, for a sum of £135 million (R2 billion). It said the reason for the sale was that over time Ansbacher had become non-core to the strategic focus of FirstRand.