Peter Hain. Picture: REUTERS
Peter Hain. Picture: REUTERS

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 having 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 the bank adhering to certain conditions.

“It should be noted that the administrative sanctions were not imposed because HSBC was found to have facilitated transactions involving money laundering or the financing of terrorism,” the Prudential Authority said in its statement.

But Hain, a Labour Party member of the House of Lords who grew up in SA, said that based on HSBC’s handling of Gupta accounts, the penalty was not surprising. The controversial Gupta family, along 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 the UK’s Financial Conduct Authority was still “ploughing through a lot of evidence” as part of its investigation into the transfers. He said he had provided investigators with “detailed information” about the transactions.

Hain told the House of Lords in November 2017 that money laundering linked to former SA president Jacob Zuma and the Gupta brothers 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 that was meant to build a dairy farm for the benefit of impoverished families, allegedly transferred most of the funds meant for the project 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 eye-watering 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 was used to pay for a lavish Gupta family wedding.

Although HBSC’s fine in SA was the result of inadequate controls, rather than being linked to illicit transactions, the bank has already been on the receiving end of such penalties in other markets. In 2012, it was fined $1.9bn by US authorities for failing to prevent Mexican drug cartels from laundering money.