London - Global bank HSBC is shuttering accounts associated with the Gupta family as it assesses its exposure to the scandal gripping South Africa.
The bank is conducting a wide-ranging review of any possible involvement in suspicious transactions, with the assistance of external investigators, people with knowledge of the matter said.
HSBC first closed accounts held by companies linked to the Gupta family in 2014 after internal compliance procedures picked up transactions that couldn’t be explained as legitimate business, the people said, asking not to be identified discussing a matter that isn’t public.
Banks are required to report any transactions they suspect may be related to illicit activities.
“Any exposure that we had to the Guptas’ companies was inadvertent,” HSBC said in an emailed statement to Bloomberg on Monday. “For the past couple of years, we have been in the process of identifying what there is and shutting it down.”
UK regulators last month said they are looking into whether HSBC and Standard Chartered facilitated money-laundering as a result of possible ties to the Gupta family after a British politician warned illicit funds may have passed through the United Arab Emirates and Hong Kong, where the banks have had large footprints.
The scandal around the Indian-born Gupta brothers, their business connections with the family of President Jacob Zuma and their alleged ability to direct state tenders have rocked South Africa’s government. Zuma and the Guptas have consistently denied any wrongdoing.
Software giant SAP, accountancy KPMG, and management consultants McKinsey & Co. are among the major international brands that have been drawn into the saga because of their dealings with entities linked to the Guptas.
Last year, Pravin Gordhan, South Africa’s finance minister at the time, said in a court affidavit that since 2012 banks had reported R6.8bn in suspicious payments made by the three Gupta brothers, companies they control and other individuals with the same surname.
Information on the Guptas’ connections has accumulated over the years, with a major leak of their data in June revealing the depth of their dealings with state and private companies.
The bank’s senior management is aware of the issue and is dealing with the matter, the people said.
“HSBC is in an entirely different position from some of the other companies which were intentionally seeking to do business with the Guptas and the Guptas’ companies,” the bank said. “HSBC was never interested in doing business with the Guptas’ companies.”
Peter Hain, a Labour Party member of the House of Lords, asked UK authorities in a speech in parliament to probe an unnamed British bank for "possible criminal complicity," after it allegedly failed to take action on internal concerns about suspicious transactions related to the Guptas. HSBC is the bank, according to two people with knowledge of the allegations.
In December 2012, HSBC agreed to pay a $1.9bn fine to settle U.S. allegations it had facilitated money laundering and sanctions evasion by clients.
It has also been under the supervision of an external monitor since then as part of the settlement. The bank says it has improved its in-house controls as was required under the agreement, including building a team of 6 000 financial crimes specialists.* Sign up to Fin24's top news in your inbox: SUBSCRIBE TO FIN24 NEWSLETTER