U.K. Prods Banks on Gupta Ties -- WSJ
20 October 2017 - 6:02PM
Dow Jones News
By Margot Patrick in London and Gabriele Steinhauser in Johannesburg
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (October 20, 2017).
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 a 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 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 U.K. regulators request to the banks comes after Indonesia
officials last week 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.
Write to Margot Patrick at margot.patrick@wsj.com and Gabriele
Steinhauser at gabriele.steinhauser@wsj.com
(END) Dow Jones Newswires
October 20, 2017 02:47 ET (06:47 GMT)
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