HSBC fine not surprising, says Hain
Campaigner Peter Hain says bank was complacent about the way it handled SA accounts
Peter Hain, the senior British legislator who sparked a criminal probe into HSBC’s ties to the Gupta family, says he is not surprised that the Londonbased lender has been fined in SA for lax money-laundering controls.
Peter Hain, the senior British legislator who sparked a criminal probe into HSBC’s ties to the Gupta family, says he is not surprised that the London-based lender has been fined in SA for lax money-laundering controls.
The SA Reserve Bank said on Friday it had fined HSBC’s local business R15m for weaknesses in its processes that could fail to detect money laundering and terrorism financing. The fine follows an inspection in 2016.
The Bank’s Prudential Authority ordered HSBC to fix the problems and pay the fine, half of which would be suspended for three years subject to certain conditions.
Hain, a Labour Party member of the House of Lords who grew up in SA, said based on HSBC’s handling of Gupta accounts, the penalty was not surprising. The controversial Gupta family, with former president Jacob Zuma’s son Duduzane, is at the centre of state capture allegations.
“I think HSBC have been incredibly complacent about the way they’ve managed SA accounts, suspicious or normal. There’s no question that the Guptas, as HSBC admitted to me, had used their accounts.”
A year ago Hain told British legislators that HSBC’s SA branch had alerted the bank’s London office about the Guptas’ transfers of money from SA to the UK and other markets.
However, the London unit had chosen to ignore those warnings, Hain said at the time.
He told Business Day on Sunday that the UK’s Financial Conduct Authority was still “ploughing through a lot of evidence” as part of its probe into the transfers.
He said that he had given investigators “detailed information” about the transactions.
Hain told the House of Lords in November 2017 that money laundering linked to Zuma and the Guptas had been “painful for me to witness”.
At the time he cited the Estina dairy farm project in the Free State as an example of illicit flows linked to the Guptas.
Estina, the vehicle meant to build a dairy farm for the benefit of impoverished families, allegedly transferred most of the funds meant for it to a Gupta company in the United Arab Emirates (UAE), called Gateway.
“Once the funds were in Dubai the Guptas engaged in a classic laundering cycle, transforming illicit money into ostensibly legitimate assets,” Hain said. “In arguably the most eyewatering example, they transferred over £2m of the Estina dairy money in two separate tranches through two shell companies, ultimately consolidating it in their Standard Chartered account for another of their UAE-based companies, called Accurate Investments.”
That money was then laundered back to SA and used to pay for a lavish Gupta wedding.
Though HBSC’s fine in SA is the result of inadequate controls, rather than illicit transactions, it has received such penalties in other markets. In 2012 it was fined $1.9bn by US authorities for not preventing Mexican drug cartels from laundering money.