HSBC Holdings PLC and Standard Chartered PLC have been asked by the U.K. financial regulator to review possible business with South Africa's Gupta family, becoming the latest firms to be hit by the fallout from a corruption scandal in Africa's most developed economy.
After a request from U.K. Chancellor Philip Hammond, the U.K. Financial Conduct Authority said Thursday it has been in contact with the two banks about their possible dealings with the family and "will consider carefully further responses received."
Standard Chartered in a statement said it shut down some accounts linked to the Guptas in 2014 after an internal investigation. HSBC declined to comment.
South African police and prosecutors have said they are investigating allegations of corruption, including potential kickbacks from international companies, which were brought to light by a flood of emails and other documents that appear to have been obtained from Gupta-controlled companies. The documents have buttressed longstanding suspicions among many South Africans that the powerful business clan leveraged its connection to President Jacob Zuma and other government officials to amass great personal wealth.
The Guptas and Mr. Zuma have denied wrongdoing.
The scandal so far has ensnared international firms including KPMG International, SAP SE and McKinsey & Co., and led to the collapse of the U.K. arm of public relations firm Bell Pottinger over its work for a Gupta holding company.
KPMG, which audited Gupta companies for 15 years, last month removed the leadership of its South African branch after an internal probe found it fell short of its own standards during the 15 years it audited Gupta companies.
McKinsey this week said it had disciplined some staff for violating professional standards on a contract with a South African company that was owned by a close associate of the Guptas. SAP said it would release the findings of an internal investigation over alleged kickbacks to a Gutpa company by the end of this month.
KPMG and McKinsey have denied any wrongdoing. SAP's South African office denied the allegations of kickbacks when they first surfaced in media reports in July, but the statement was removed from the company's website days later when the software maker launched the internal probe. A spokesman has declined to comment on why the statement was removed.
Peter Hain, a former cabinet minister and member of the House of Lords, confirmed on Thursday that he had written to Mr. Hammond last month about allegations by a whistleblower that HSBC and Standard Chartered may have inadvertently served as conduits for corrupt proceeds. An exchange of letters between Mr. Hain and the Treasury became public on Wednesday [we should say if parliament released the letter].
"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 Treasury spokeswoman said.
The NCA and SFO said they are aware of the matter.
According to documents that appear to have been come from a Gupta company hard drive, and which have been reviewed by The Wall Street Journal, several Standard Chartered accounts were used in 2013 to transfer money between Gupta-controlled companies in South Africa and Dubai to pay for a lavish family wedding.
The documents also show that the funds originated from a government contract to run a dairy farm for poor black South Africans. Standard Chartered has previously said that it closed the accounts used the in transactions in early 2014.
The alleged possible dealings with the Guptas or related-parties joins a long list of money-laundering scandals for the two U.K. banks. Last week, Indonesia officials said they are probing holders of $1.4 billion in trust accounts at Standard Chartered for possible tax due.
The transfer of the accounts in 2015 from Guernsey and Singapore prompted investigations by regulators around the bank's anti-money laundering checks on customers.
Both banks have so-called deferred prosecution agreements with the U.S. over failings in their anti-money laundering controls, among other breaches. As part of the agreements to avoid criminal prosecution, HSBC and Standard Chartered have spent billions of dollars improving their compliance systems.
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(END) Dow Jones Newswires
October 19, 2017 10:02 ET (14:02 GMT)