Bank Regulation

Banks Linked to South African Money Laundering Scandal

HSBC and Standard Chartered, the two U.K. banks, are facing a review by the country’s financial regulators and the Serious Fraud Office to determine whether they are linked to the corruption scandal in South Africa.

According to a BBC news report, the moves come after Lord Peter Hain said the two firms may “inadvertently have been conduits” for money laundering, with up to £400m in illegal funds potentially being moved by HSBC and Standard Chartered. Hain wrote to the Chancellor Philip Hammond, contending that a whistleblower told him the banks could be inadvertently involved in the corruption scandal. The letter has since been sent to regulators, including the Financial Conduct Authority and the Serious Fraud Office, the BBC reported.

“We take allegations of financial misconduct very seriously, and have passed Lord Hain’s letter on to the Financial Conduct Authority and relevant U.K. law enforcement agencies, including the National Crime Agency and Serious Fraud Office, to agree the right action,” a spokesperson from the Treasury told the BBC.

The letter stems from a scandal between South Africa‘s President Jacob Zuma and the Guptas, a wealthy business family. Both have denied any wrongdoing, arguing that they are part of a witch hunt driven by politics. Emails, however, have sparked claims that the Guptas curried favor in the government via money. The scandal has already hurt Bell Pottinger, a U.K. public relations firm, as well as the reputation of KPMG auditors, which were forced to remove top leadership in South Africa, noted the report.

In a statement to the BBC, Standard Chartered said: “We are not able to comment on the details of client transactions, but can confirm that following an internal investigation, accounts were closed by us in 2014.” HSBC declined to comment. Separately, the BBC, citing the Financial Times, reported that the FBI has launched an inquiry into potential links between the Guptas and banks, individuals and companies in the United States.

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