Global players enabled ‘Zupta’ corruption
In his memoir, ‘A Pretoria Boy’, Peter Hain describes his journey from South African antiapartheid campaigner to the British cabinet and then the House of Lords, where he exposed widespread corruption under former president Jacob Zuma and the notorious Gu
Without complicit fee-clutching global corporates and turn-a-blindeye governments — from London and Washington to Dubai, Delhi and Beijing — the “Zupta” decade of prodigious looting and money laundering could not have happened.
Robbing South African taxpayers of billions of rand and contributing to a catastrophic loss of GDP of about a fifth under former president Jacob Zuma, was ultimately the fault of international actors. They helped the Gupta brothers move their ill-gotten gains out of South Africa, and then sometimes back in, undetected.
It was international actors who helped the Guptas and their associates create complex corporate structures disguising the true ownership of funds and complicating the tracing and repatriation of stolen funds while earning huge fees out of the looting. It was international actors who provided refuge to corrupt individuals and the means to continue their activities through less regulated “open” economies such as Dubai and Hong Kong.
Electronic banking remains the simplest and fastest way of transferring funds between people and across borders. It allows criminals to move their money to more convenient (often also less regulated) jurisdictions and it “cleans” the money by mingling it with other funds and disguising its source so that it is easier to spend.
The Guptas used a number of international banks — many of them household names such as HSBC, Standard Chartered and Bank of Baroda — to transfer money, disguise payments and hide the source of their illicit funds through the global banking network out of South Africa and then back in.
These banks should have spotted this suspicious activity by the Guptas much sooner, or immediately. It included: secretive transactions to obscure the ownership of the accounts; unexplained payments to and from third parties with little or no apparent connection to the underlying transaction; the transfer of funds around shell companies, which do not conduct trading and obscure the persons who control them; and unexplained connections with and movement of monies between jurisdictions.
Much of this occurred when South African media outlets such as the Mail & Guardian were exposing corruption under Zuma and identifying the Gupta brothers’ key role, and when legitimate funds created by the Gupta enterprises were dwarfed by the funds they amassed through illegal activity.
A specific example of a transaction that should have been stopped, or at least investigated by the Bank of Baroda South Africa (part of India’s state-owned, global Bank of Baroda), was a loan on 18 January 2017 by Trillian Management Consulting (then majority-owned by a Gupta associate, Salim Essa) of R160million to Centaur Mining (a Guptaowned company) through Trillian Financial Advisory (a Gupta-owned company).
The Bank of Baroda simply waved this through. So did Standard Chartered over South African government funding for the Estina dairy project, transferred through the Gupta-controlled Estina (Pty) Ltd to an account held by Gateway Limited (a Gupta-owned company registered in the United Arab Emirates).
Standard Chartered did not stop these transactions, despite the fact that government funds were leaving the South African jurisdiction to a company beneficially owned by the Guptas with no material explanation provided for the suspicious payment structure.
More than $100-million of the alleged kickbacks received by the Guptas over purchases of Chinese locomotives by Transnet were reportedly channelled through the HSBC Hong Kong accounts of their front companies Tequesta and Regiments Asia.
It is unacceptable that senior directors of HSBC and Standard Chartered — who cited “client confidentiality” — would not cooperate when I asked them at meetings in my House of Lords office to trace and track the money laundered by the Guptas. The Bank of Baroda bosses brazenly denied any culpability.
Then there are the “professional enablers” — lawyers, consultants, auditors/accountants and estate agents — who “clean” the money for a fee. Their role is to disguise the source, location and ownership of funds. Lawyers assisted the Guptas to set up complex shell companies enabling money to be moved from one country to another country where there is low transparency.
Accountants audited incorrectly, leaving suspicious transactions hidden in the accounts. Estate agents received laundered money into Gupta or Gupta-controlled accounts during property purchases.
Global brand names such as
KPMG, Bain & Co and Hogan Lovells assisted the Guptas in their looting from the South African people.
They all profited while the Guptas hid stolen funds that could have been spent on essential public services and on helping to repair the colossal damage caused by apartheid.
Meanwhile, global consultants SAP and Mckinsey nefariously brokered deals with evidently corrupt government officials and associates, also earning enormous fees.
Without global cooperation and coordination between states, criminals are able to dodge the rule of law by relocating themselves and their stolen funds to other jurisdictions where regulations are weaker, regulators are underfunded or where there is less transparency regarding corporate ownership.
The United Kingdom and South
Africa, for example, have strict anti-money laundering regulations but the Guptas evaded this legislation with the assistance of South African public officials and Londonheadquartered or -located global banks and professional enablers.
The ruler of Dubai has allowed the Guptas to safeguard their stolen wealth. Hong Kong has taken no public action against the Guptas for funnelling laundered funds and receiving kickbacks. India (their country of birth) claims to have investigated the Guptas, but has taken no enforcement action nor repatriated funds to South Africa.
Investigative agencies (the Serious Fraud Office, National Crime Agency and Financial Conduct Authority in the UK, and the Directorate for Priority Crime Investigation within the South African Police Service and the National Prosecuting Authority and the Special Investigating Unit in South Africa) require proper resourcing. Yet in neither country has that been the case.
Banks and professional enablers should be on the frontline in combatting financial crime, and it should be a source of shame for the world’s leading economies that the banks and other corporates responsible for facilitating corrupt practices in foreign countries are headquartered in their jurisdictions (London, New York, Delhi and Shanghai).
Funds moved around the world today leave a digital footprint. Banks possess the technological and financial clout needed to force change, and that power should be harnessed to assist — not obstruct — regulators to target their limited resources.
Although some sharing of information already occurs, it is paltry and ineffective, and banks should stop hiding behind client confidentiality and work collaboratively and proactively to share data and intelligence on a confidential basis with regulators and enforcement agencies.
Banks and professional enablers should face sanctions at an organisational and an individual level. Licences should be stripped from banks if they fail to meet antimoney-laundering standards. A “senior manager’s regime” should be introduced to ensure personal responsibility. This should include disbarment for money laundering and corruption failures such as over South Africa’s state capture scandal.
Looted billions were siphoned from the South African offices of Standard Chartered, HSBC and the Bank of Baroda to offices mainly in Dubai and Hong Kong. Their Johannesburg managers cannot be allowed to get away with saying, “Nothing to do with me”. They are global institutions, culpable for facilitating money laundering.
On top of all this governments — especially of India, Hong Kong/ China, Dubai, the UK and the US — must lead the fight against global money laundering and corruption instead of paying lip service.
Without cross-border cooperation, no country will be emancipated from financial crime estimated by the United Nations Office on Drugs and Crime to be worth about 5% of global GDP, or $2-trillion, each year.