HSBC and Standard Chartered face UK investigation over ties to South Africa's Gupta family

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UK regulators are looking into whether HSBC and Standard Chartered facilitated money-laundering as a result of possible ties to South Africa’s politically powerful Gupta family.

The Financial Conduct Authority is taking interest after Lord Hain wrote a letter raising concerns about the banks’ possible exposure to the Guptas. The Labour peer mentioned 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 multinational networks do – for their global reach,” Lord Hain said in a letter to Chancellor Philip Hammond on 25 September. “I have deep concerns and questions around the complicity, whether witting or unwitting, of UK 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, the peer also requested that authorities look into India’s Bank of Baroda, the only place still holding accounts for Gupta companies. In June, South Africa’s central bank fined Baroda’s South African unit 11 million rand (£616,000) 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 Mr Zuma all declined to comment. Mr 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 spokeswoman for the Serious Fraud Office 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.”

Bloomberg