HSBC has revealed that it closed accounts linked to South Africa’s Gupta family corruption investigation, admitting for the first time concerns about its potential ties to the snowballing scandal.
The bank said it had also flagged up its concerns to the financial crime expert who has overseen its money-laundering controls since it was fined a record $1.9bn in 2012 for processing cash for Mexican drug lords and terrorists.
Regulators in the UK are already looking into whether HSBC and another bank, Standard Chartered, had ties to the Guptas after former cabinet minister Lord Hain passed a list of transactions to the chancellor warning of their “possible criminal complicity”.
HSBC admitted on Friday that it was forced to close bank accounts held by “front companies” associated with the Guptas.
The bank has previously declined to comment on its involvement, but revealed its concerns after details of transactions linked to the Guptas emerged.
The bank said: “HSBC has been reviewing its exposure to the Guptas for some time, and has closed a number of accounts for associated front companies wherever we have found them.
“As we identify or are presented with new information, we will continue to investigate further and take appropriate action.”
HSBC is understood to have closed the accounts in 2014, the same year that Standard Chartered said it had shut down accounts linked to the Guptas.
It also notified Michael Cherkasky, who monitors the bank’s anti-money laundering controls as a condition of its 2012 settlement with the US Department of Justice and the UK’s Financial Conduct Authority (FCA).
The bank issued a statement in response to evidence contained in the GuptaLeaks, a tranche of files released in South Africa and reported in the Wall Street Journal.
The documents reportedly reveal that HSBC bank accounts in Dubai were used to channel millions of dollars via companies linked to contracts to sell Chinese rail locomotives to South Africa.
The contracts are being examined as part of an ongoing corruption investigation into whether the wealthy Gupta family benefited from wielding influence over South Africa’s president Jacob Zuma.
Hain, who first raised concerns about UK banks’ links to the Guptas last month, said“This demonstrates yet again that any global company doing any business with the Guptas or Zumas is guaranteed to be badly contaminated, just as Bell Pottinger was going bankrupt, and KPMG, McKinsey and SAP have also been.
Banks like HSBC must not be conduits for alleged money-laundering, Hain said, adding that all the evidence points to not just HSBC but other banks having been such conduits.
The Guptas, who have not responded to requests for comment about the allegations by the Guardian, have previously denied any wrongdoing.
Fresh detail about transactions involving HSBC could lead to the bank facing investigation by US authorities, because they were made in dollars and cleared by the bank’s New York office.
The FBI is already examining whether businesses linked to the Guptas moved money through the American financial system, according to reports in the US.
The bank has been battling to increase its resilience to financial crime since the 2012 fine, when it reached a settlement with the US authorities over allegations it had allowed money from the Sinaloa drug cartel to be laundered via its Mexican branches.
As part of the deferred prosecution agreement (DPA) Cherkasky was installed in July 2013 to oversee HSBC’s efforts to clean up its act.
The bank has said it is on track to have its anti-money laundering and sanctions policy framework in place by the end of this year, although Cherkasky has uncovered issues along the way.
“HSBC is determined to prevent criminals from accessing the financial system,” the bank said.
“This is inherently challenging because those who seek to launder money are often extremely sophisticated, hiding behind legitimate companies, layers of front companies, connected parties and individuals that have controlling interests in the subject companies.
In February HSBC revealed it was investigated by the FCA over potential breaches of money laundering rules that had been highlighted by Cherkasky.
Cherkasky’s final report is thought to be scheduled for next March, after which it will be up to the DoJ to decide whether the terms of the DPA have been met.
On Friday Standard Chartered had its DPA – originally agreed around the same time as HSBC’s – extended for a second time, until July 2018.
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