Finance Minister Tito Mboweni on Tuesday condemned auditing firm KPMG for signing off on the financial statements of failed VBS Mutual Bank even though, according to a South African Reserve Bank report, it was clear that it had a shortfall of about R1-billion.

"When you have a big auditing firm failing us in the manner that one has, that is a serious concern," Mboweni told Parliament's standing committee on finance.

"In this case I think we were failed by both the internal auditors and the external auditors. It seemed to have been part of the heist."

According to the report authored by Advocate Terry Motau, former KPMG partner Sipho Malaba was rewarded R28-million by those who plundered VBS's coffers.

Mboweni, who served as governor of the SARB for ten years, suggested that the central bank should look at extending its onsite inspections at major banks to smaller banks to prevent a repeat of abuses such as those detailed at VBS.

"The central bank had a capacity for onsite inspection, at some of the big banks we had onsite inspectors. Looking overall at the experience ... the  central bank has to be very mindful of what they can do in terms of inspections," he said.

Mboweni said he hoped that, in line with the call by Motau, there would be criminal proceedings against those who caused the failure of VBS through a brazen scheme of paying bribes to solicit deposits.

The finance minister added that political parties must act against their members found to have benefited from the fraud scandal.

Motau listed the brother of Economic Freedom Fighters chief whip Floyd Shivambu, Brian, among the individuals who gratuitously received millions of rands from VBS.

Media reports have suggested that Floyd Shivambu also received R13-million and the EFF R1.3-million. Shivambu has dismissed the reports as "weapons of mass deception".

KPMG's reputation suffered extensive damage over its investigation into a "rogue intelligence unit" within the South African Revenue Service, which later turned out to have been a politically motivated fabrication.

Motau recommended that the audit firm be held liable for damages incurred by the VBS curator, the National Treasury and the Prudential Authority.