In June 2011, the then Financial Services Authority found shocking inadequacies in UK banks’ anti-money laundering controls, with a third of banks accepting “very high levels of money laundering risk” and three quarters of banks failing to take adequate measures to establish the legitimacy of the wealth they were handling. The acting head of financial crime at the FSA at the time, Tracey McDermott, said publicly: “The banks are just not taking the rules seriously enough.”
Yet, after all these strong words, what happened? Instead of the FSA (now FCA) getting tough with banks, since 2010 only 10 people have been convicted under the Money Laundering Regulations – not one of them a bank. It’s hardly surprising therefore that there have been repeated money laundering scandals involving UK banks. There is simply no adequate deterrence, no serious regulatory risk for banks to make UK banks turn away profitable business. And there will not be until the FCA does start prosecuting people and banks for failing to apply the regulations.
The UK is woefully behind where we should be on holding banks and financial institutions to account for money laundering. HSBC was fined $1.2-billion in the US in a criminal settlement for money laundering and, just a few weeks ago, $352-million in France to settle criminal charges for money laundering. Despite being a UK headquartered bank, and despite being under investigation since December 2016 by the FCA, HSBC hasn’t even yet faced regulatory sanction in the UK. This is despite the fact it has been named repeatedly in corruption cases, for example in Nigeria in 2012 and during the 2000s. No UK action was taken against HSBC in any of these cases. Earlier in 2017, HSBC was again implicated with other British banks in laundering ill-gotten money out of Russia.
A failure to prevent offence for money laundering, as provided for in this amendment 69B, would make it significantly easier to hold large global banks like HSBC to account, both for poor procedures and for turning a blind eye to handling corrupt wealth. Without this reform, as Jonathan Fisher QC – a money laundering expert – has explained, it would be “difficult and clumsy” for the FCA or any other agency to prosecute a bank like HSBC because they “would have to show that a director or some other ‘controlling mind’ in the parent company in London knew about the alleged misconduct.” Indeed, they would have to show that that director intended for the misconduct to happen. This is an exceptionally high bar which makes it virtually impossible to hold large global financial actors like HSBC to account in the UK.
My Lords, in my speech at Second Reading on 1 November 2017, I described a vivid context for this Bill, namely the massive money laundering organised from the very top of government in South Africa, the Presidency itself: the systemic transnational financial crime network facilitated by an Indian-South African family, the Guptas, and the presidential family, the Zumas.
British-based financial institutions like HSBC, Standard Chartered and the Bank of Baroda, and other international institutions, have been conduits for laundering hundreds of millions of pounds or billions of rand, mostly through Dubai and Hong Kong.
The South African Parliament is itself in the process of holding a public inquiry into large-scale State Capture involving even larger-scale corruption and looting of State-owned Enterprises. And on 21 November 2017, Mr Zola Andile Tsotsi, erstwhile Chair of the state-owned electricity generator, Eskom, gave evidence under oath.
What resulted is the first “smoking gun” implicating the President of South Africa, Jacob Zuma, as he exerted shadow-control over State-owned Enterprises which have been exploited through large-scale looting and money laundering, from which his family and friends have benefited. He did this by deploying one of his “nominees”, Ms Dudu Myeni, a person near and dear to President Zuma – he fathered a child by her. Educated as a primary school teacher, in 2012 she was appointed Chair of Africa’s largest state-owned airline, South African Airways.
In early December 2015 the then Minister of Finance, Nhlanhla Nene, rejected her request to renegotiate a fleet renewal deal for SAA, because it smacked of corruption. Within days the president sacked Minister Nene.
Evidence before the South African parliamentary public inquiry showed that, as Chair of the state-owned airline, Ms Myeni not only facilitated looting by the Zuma and Gupta families, but also sought to control, instruct and manipulate the running of a state-owned power utility, Eskom, from which the Gupta family, through an intricate network of companies, have syphoned off billions of rand, via various banks, including London-based banks which I am asking the British authorities to investigate.
First Eskom Chair Mr Tsotsi was ordered by the Government Minister for Public Enterprises in February 2015 to refrain from “interfering” with the management of Eskom. He only chaired the Eskom Board after all; why on earth should he bother himself with holding to account executives under him? This ministerial instruction, to put it simply, was to stop him scrutinising the decisions and behaviour of Eskom and instead to turn a blind eye to the corrupt award of multibillion-rand contracts to benefit the Gupta and Zuma families.
According to the evidence led at the parliamentary inquiry, that same day in February 2015, Mr Tony Gupta called Mr Tsotsi, accusing him of not “helping us with anything”, adding: “We are the ones that put you in the position you are in. We are the ones who can take you out!”
A few days later, on the eve of the first newly appointed Eskom board’s meeting, President Zuma called Mr Tsotsi instructing that the board meeting be postponed, without giving reasons.
Less than a week later Mr Tsotsi was instructed by South African Airways’ Chair Ms Dudu Myeni to attend the presidential residence on 7 March 2015 where she unlawfully ordered the suspension of three of Eskom’s key executive members. President Zuma arrived late to this “meeting” and ordered that Mr Tsotsi go along with this “plan”, resulting in one of the most notorious examples of looting in South Africa’s recent history.
This Zuma/Gupta conspiracy then left the door wide open for the appointment of Gupta stooges and, in less than 18 months, they had bled the power utility dry and it now faces bankruptcy and has been downgraded by international financial institutions due to governance failures. Eskom has more than R471-billion in outstanding debt, the majority of which is guaranteed by the SA government and owed mainly to funders outside SA. In October 2017, Eskom revealed to its largest shareholder, the SA Government, that the power utility only had R1.2-billion left in its cash reserves until the end of November 2017, whilst it should have had R20-billion. It is estimated that by the end of January 2018 Eskom will be running at a R5-billion deficit. The fact that Eskom virtually “gave” billions to the Gupta/Zuma syndicate, through nonsensical “consulting” contracts, tenders for fictitious goods and services, and advances to allow them to buy the coal mines from which they then sold back over-priced poor quality coal, is the underlying cause of what went wrong.
Similarly, in September 2017 South African Airways was given emergency Treasury funds to help it repay loans of R3-billion to Citibank, again diverting precious money from taxpayers into the pockets of the Zumas and Guptas.
The bill is being picked up by taxpayers when there is such a shortage of decent schools, hospitals, housing and job opportunities those billions should be spent on.
Each South African State-owned Enterprise has been looted using the same modus operandi by the same elite individuals at the very top of the chain, namely President Zuma and his family and the now infamous Gupta family. They have placed cronies like Ms Myeni in key decision-making positions in these public enterprises to ensure that all valuable tenders are syphoned off to the Guptas and in return a “cut” is then given to the Zuma family. Hundreds of millions of pounds have been syphoned off these important public companies, in a process that has been described by the South African media as “State Capture”.
What is more, well-placed South African whistle-blowers inform me that UK financial and banking institutions have been used for the systemic transnational financial crime network run by the Gupta and Zuma families.
My Lords, then there is the shadowy figure Mr Nick Linnell, a “Mr fix-it” who in the late 1970s operated in the illegal racist white minority regime of Ian Smith in then Rhodesia. He was unlawfully hired by Eskom (on Ms Myeni’s instructions) to assist in unlawfully getting rid of certain executives, thereby clearing the way for the corrupt capture of Eskom. It has now emerged that South African Airways, through dubious unauthorised payments to Mr Nick Linnell working hand-in-glove with the remnants of South Africa’s notorious apartheid police, have deliberately “targeted” well-known anti-corruption activists. This resulted in unlawful arrests, detention and torture, in a desperate attempt at silencing these courageous men and women, to stop them from exposing systemic state-sponsored corruption.
By the way, over last weekend it was announced that Dudu Myeni has been appointed as the special adviser to the Transport Minister and that she came “highly recommended”.
My Lords, I therefore hope that not only will this amendment be supported by the government but there should be an immediate investigation, by the City of London Police, the Metropolitan Police and the financial regulatory authorities, into all bank accounts held in London by any South African state-owned company.
Because of South African airways’ chairperson’s patently unlawful involvement with the Zuma and Gupta families, the authorities should start their investigations with the airline, who are known to bank in London, to ensure that their UK accounts have not been used for the illegal laundering of monies from the proceeds of financial crime in South Africa, or that payments into UK banks from South African Airways have not been used to pay off stooges that have unlawfully targeted corruption whistle-blowers.
The British Government must not permit any UK-based financial institution to be complicit in the plundering of state-owned companies in foreign lands, especially when that plunder affects the poorest of the poor. South Africa suffered enough repression over the apartheid years and we cannot stand idly by whilst economic repression replaces racial repression to serve the greed of corrupt leaders, when we have the ability to help stop it.
The exposure of HSBC, Standard Chartered and Baroda Banks to the parasitic Gupta financial crime network is currently the subject of international law enforcement investigations from the FBI to the FCA.
Inevitably, when dirty money from a global criminal network infects one financial institution, it will sequentially infect a number of others. This is the result of what is known as “correspondent banking”, a term which by its complex nature is often misunderstood. Correspondent banks are international banks that clear smaller, generally domestic, banks’ foreign currency transactions through large financial centres. In practice, this means that one transaction can move through a chain of financial institutions from the point of payment, before it reaches its intended beneficiary. This creates significant money laundering and terrorist financing risks because each bank in the chain has to rely on the other to correctly identify the customer, determine the real owner and monitor the transaction – in essence the correspondent bank is only as strong as the weakest link in that chain.
Umpteen domestic and regional banks will inevitably have been part of the money laundering chain of Gupta money. These include in South Africa, Nedbank and Standard Bank; in the UAE, Habib Bank; in China, Citibank China and Bank of China; and almost certainly every well-known bank in continental Europe.
In the UK, Barclays Bank, which has a significant South Africa and Africa presence, together with Santander which also has a global footprint, should be given red flag warning to check their exposure to Gupta money laundering – both direct and indirect. It is essential that all UK banks refuse to have anything to do with the Guptas or Zumas.
It is not good enough for them to argue that they reported suspicious transactions to their relevant domestic regulatory authority. For over 10 years, the Guptas have washed their money, aided by a labyrinth of correspondent banks – names that we would all recognise and probably bank with. Had these banks closed the Gupta accounts of their own volition – even five years ago – and not simply in reaction to recent political and investigatory journalist pressures, South Africa might not be on her economic knees today.
In the same way that other companies – like Bell Pottinger, KPMG, SAP and McKinsey – have been exposed and called to account for complicity in corruption for doing business with the Guptas, so too must these banks.
It’s not good enough just to haul HSBC, Standard Chartered and Baroda over the coals because the nature of dirty money is that it passes through a chain of banks from originator to beneficiary. The banks in between are also guilty and, if they don’t act, they risk exposure and reputational damage of the kind suffered by HSBC.
The message from our Parliament should be loud and clear: no UK commercial entity should have anything to do with the Guptas or Zumas.
By accepting this amendment, the government would at last demonstrate that the UK is serious about ensuring that its financial institutions must stop being used to pilfer public money from countries around the world and to ensure that banks do not put profit before ethics when handling risky money. DM
Photo: Britain’s then Northern Ireland Secretary Peter Hain, during his keynote speech at the Labour Party’s annual conference, in Manchester, England, Thursday 28 September 2006. EPA/RICHARD LEWIS
Want to watch Richard Poplak’s audition for SA’s Got Talent?
Who doesn’t? Alas, it was removed by the host site for prolific swearing*... Now that we’ve got your attention, we thought we’d take the opportunity to talk to you about the small matter of book burning and freedom of speech.
Since its release, Pieter-Louis Myburgh’s book Gangster State, has sparked numerous fascist-like behavior from certain members of the public (and the State). There have been planned book burnings, disrupted launches and Ace Magashule has openly called him a liar. And just to say thanks, a R10m defamation suit has been lodged against the author.
Pieter-Louis Myburgh is our latest Scorpio Investigative journalist recruit and we’re not going to let him and his crucial book be silenced. When the Cape Town launch was postponed, Maverick Insider stepped in and relocated it to a secure location so that Pieter-Louis’ revelations could be heard by the public. If we’ve learnt one thing over the past ten years it is this: when anyone tries to infringe on our constitutional rights, we have to fight back. Every day, our journalists are uncovering more details and evidence of State Capture and its various reincarnations. The rot is deep and the threats, like this recent one to freedom of speech, are real. You can support the cause by becoming an Insider and help free the speech that can make a difference.
*No video of Richard Poplak auditioning for SA’s Got Talent actually exists. Unless it does and we don’t know about it please send it through.
The sound of Krakatoa exploding travelled around the earth three times.