JOHANNESBURG - UK regulators are looking into whether HSBC Holdings Plc and Standard Chartered Plc facilitated money-laundering as a result of possible ties to South Africa’s politically powerful Gupta family.
The Financial Conduct Authority probe comes after Peter Hain, a member of the unelected House of Lords, wrote a letter raising concerns about the banks’ possible exposure to the Guptas. In the letter, Hain said allegedly illicit funds may have passed through the United Arab Emirates and Hong Kong, where HSBC and Standard Chartered had large footprints.
"It will be no secret to financial crime experts that criminals target large and credible financial institutions for the same reasons that legitimate multi-national networks do - for their global reach," Hain said in the Sept. 25 letter to U.K. Chancellor Philip Hammond. "I have deep concerns and questions around the complicity, whether witting or unwitting, of U.K. global financial institutions in the Gupta/Zuma criminal network."
The three Indian-born Gupta brothers are at the heart of South Africa’s biggest post-apartheid scandal. South African opposition groups, campaigners and investigators accuse them of using their friendship with President Jacob Zuma and business partnership with his son to make millions of dollars from state contracts. Hain asked the authorities to investigate Zuma, 10 of his family members, 11 Gupta family members, and five other associates, as well as 14 entities linked to them.
In a question to the House of Lords on Thursday, Hain also requested the authorities look into India’s Bank of Baroda, which is the last bank to hold bank accounts for Gupta companies. South Africa’s central bank in June fined Baroda’s South African unit 11 million rand ($813,000) for lapses in its financial crime prevention measures.
Standard Chartered said while it wasn’t able to comment on specific client transactions, it could “confirm that after an internal investigation, accounts were closed by us by early 2014."
"Standard Chartered takes its responsibility to combat financial crime very seriously and is fully committed to doing business in accordance with local and international regulatory and legal requirements,” the London-based bank said in a statement.
HSBC and spokespeople for the Guptas and Zuma all declined to comment. Zuma and the Guptas have always denied any wrongdoing. Baroda didn’t immediately respond to phone calls and an email requesting comment.
The Treasury passed Hain’s letter on to the FCA and prosecutors at the National Crime Agency and Serious Fraud Office, saying “we take allegations of financial misconduct very seriously.”
The FCA said in a statement that it had already contacted both banks named in the Hain letter and “will consider carefully further responses received.”
An SFO spokeswoman said the agency was aware of the allegations, but couldn’t comment on them at this time. The NCA said in an email that it was "aware of and reviewing the information." London’s Guardian newspaper reported on the Treasury’s request earlier.