South African anti-apartheid activist Lord Peter Hain lambasts the efforts of authorities all over the globe, outlining that there are many institutions that helped facilitate the widespread corruption and money laundering during the Gupta’s years of power. He deems these institutions as responsible for aiding and abetting wholesale corruption. The Gupta family are reported to be living in Dubai or India and of recent, the South Africa authorities have asked the International Criminal Police Organisation (Interpol) to assist with the arrest of the Gupta brothers and their wives. Peter delves into further detail below. – Justin Rowe-Roberts
From Peter Hain
In support of my speech In the Lords today in the Magnitsky-style sanctions debate, I wish to raise urgent questions about the failure of the UK government to prevent money laundering and corruption through London-based financial institutions.
I also refer to my letter of 25 September 2017 requesting that this action be taken and ask that you have an urgent meeting with South Africa’s Finance Minister to progress this.
Why have London-based companies not been prosecuted for aiding and abetting corruption by former President Zuma and his corrupt business cronies the Gupta Brothers, Ajay, Atul and Rajesh? Why have UK and US sanctions against the Gupta brothers and Salim Essa not yet yielded results?
I first asked the Chancellor in September 2017 to take action, so why have HSBC, Standard Chartered and Baroda, all global banks based in London, functioning under UK laws and regulations, still not been prosecuted for facilitating gigantic money laundering by the Zuma family and the Gupta Brothers.
As Paul Holden from Shadow World Investigations demonstrated to the Commission of Inquiry into State Capture under Deputy Chief Justice Zondo, millions went via British banks and into a vast laundromat operated by Altaf Khanani, under investigation by the US for laundering money for global drug cartels and terrorist groups.
A recent University of Stellenbosch study indicates that South Africa lost R1.5trn (£750m) in the five years between 2014 and 2019 in looting and money laundering which for a relatively small economy emerging from decades of apartheid, is a massive cross to bear.
The Gupta family are reported to be either in Dubai (where they appear to reside) or in India (where they often visit). Dubai financial district styles itself as a 1960s/70s type Swiss bank secrecy jurisdiction, so why do the UK and US governments tolerate such blatant money-laundering by the Dubai authorities, supposedly allies? Further, it appears that the UAE does not extradite its own citizens, and it may well be that the Gupta brothers and their family have attained UAE citizenship (either by buying property, or some similar mechanism). SA authorities have secured an extradition treaty with Dubai or UAE, but are struggling to get the Dubai authorities to comply with the spirit of this. Can you contact the Ruler of Dubai to expedite this please?
Why does India not extradite the Gupta brothers, given that the SA authorities have now put two of the brothers and their wives on the Interpol list. Whilst one of the brothers (Ajay) is still said to be an Indian citizen, the second brother (Atul) did take out SA citizenship, and presumably gave up his Indian citizenship in the process. Why have the Indian authorities been invisible in dealing with the money laundering at the Bank of Baroda branch in Johannesburg, and why they have not taken strong regulatory action to demonstrate to all Indian banks that they will not tolerate such lax money laundering standards by their banks in their overseas operations? Can you contact the Indian’s government to expedite this please?
Why also has Hong Kong not taken action over the many Gupta money laundering transactions through it? Can you contact the Hong Kong authorities to expedite this please?
Whilst the USA and UK have listed the Gupta family assets and are able to freeze them if deposited in USA or UK banks, will you ensure that this listing applies to assets held in non-US or non-UK banks in UAE or India; or to arresting any members of the Gupta family were they to be on USA or UK territory.
The fight against corruption is a global one, yet South Africa does not seem geared to use international channels to deal with both non-cooperating foreign jurisdictions (with extreme bank secrecy and low-tax regimes) and foreign multinational companies that benefited from the proceeds of corruption in South Africa. Can you work with South Africa’s authorities to assist here please?
Aside from what is legally possible currently by the US and UK authorities, it is instructive to consider the way the transnational investigation into the 2015 MDB Malaysian corruption scandal was conducted.
It involved more than six countries (including Switzerland, UK, USA, Singapore, Indonesia and others) working with the Malaysian authorities after its new government re-opened the investigation in 2018, to criminally charge or sanction those involved, and recover assets and funds from all over the world. Laws like the US Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act 2010 (UKBA) enable authorities in those countries to investigate any person or company domiciled or listed in their country if they are suspected to have paid bribes to foreign officials to assist in obtaining or retaining business. The USA authorities also regard their laws to apply to non-USA individuals and companies if they were party to a transaction denominated in US dollars, even if done outside of the USA. This provides a further mechanism to SA authorities to bring to justice those hiding in non-cooperating jurisdictions, and carry significant jail sentences, fines and penalties.
It should be noted that the IMDB scandal appears to have gone beyond standard international practices, and was driven politically in the sense that the six countries were shamed into acting, and also to demonstrate that their country does not tolerate money laundering. This is the approach that SA should be taking with the Gupta family, and try and push for transnational co-operation between UAE, India, Hong Kong, USA and UK (and other countries as may be identified). Can you work with South Africa’s authorities to assist here please?
Further action that the USA and UK can, and must, consider, includes taking action against multinational companies domiciled or operating in their territories, including BAIN (role in the capture of the South African Revenue Service SARS), Hogan Lovells (assisting in covering up at SARS) and McKinsey. Whilst McKinsey has paid back some of its consultancy funds back to Eskom, there are three steps that can be considered:
- criminal prosecution of all these companies (by Dept of Justice in USA, and similarly in the UK)
- Litigation against these companies in the US and UK
- Regulatory action by the SEC in the USA, or the relevant stock exchange (eg against Glencore on its meeting with Minister Zwane to sell to the Guptas)
- It is also instructive to look at LSE and NYSE filings by any of the companies above if they are listed on these exchanges. Similarly, it would be instructive to consider the regulatory filings and disclosures made by multinational and foreign-domiciled companies operating in SA, and who had business dealings with Gupta-linked companies – many of these foreign-domiciled companies would have been obligated to file regulatory disclosures in terms of USA and UK anti-corruption laws, to regulators like the USA Securities and Exchange Commission (SEC), as well as in their annual and other disclosures and announcements on exchanges like the NYSE, NASDEC and London FTSE etc. Much information can be obtained from such filings, and the failure to have made disclosures, could lay the basis for criminal charges or civil enforcements or if their disclosures were not truthful.
Can you work with US authorities to assist on these four and other related matters please?
I believe that the following questions should also be explored:
- Are there any regulatory filings on the Glencore-Optimum coal transaction in 2015-16? Was there a requirement for Glencore to file SEC or FCPA filings with the US, UK or Swiss authorities following their meeting in 2015 with Mr Zwane in Switzerland? Did Glencore or Oakbay Resources file any SENS notice on the JSE?
- Did BAIN & Company Inc disclose its secret meetings with President Zuma (as revealed in Chapter 3 of the final report of the Commission of Inquiry into Tax Administration and Governance by SARS) to USA authorities, SEC and other regulators? Did BAIN not transgress the US Foreign Corrupt Practices Act when planning the capture of SARS and to win business from SARS and other state-owned entities?
- Did McKinsey break the US FCPA to secure work from Eskom and other state-owned entities through its “partnerships” with Regiments Capital and Trillian Partners?
- What charges or complaints can be filed with US and UK authorities and their professional bodies on the role of foreign legal firms like Hogan Lovells and their role at SARS?
- Can we put in place a more systematic and centralised process to identify all the multinationals, audit companies, foreign consultancies, legal firms and public relations consultants that played some role in facilitating corruption or state capture in South Africa? Can such a centralised process also work with overseas authorities to investigate transgressions and violations of both South African and foreign country laws (e.g. USA/UK)?
I believe the above proposals will assist President Ramaphosa to turn around corruption, and rebuild trust in South Africa’s government. I believe that the British and US governments should work with South Africa’s to support its anti-corruption strategy to focus on the four areas below:
Investigative process: To ensure that our criminal prosecution system acts quickly to investigate each and every suspicious or corrupt transaction they are alerted to, from whatever source, be it referred to them by the FIC, SARS, a whistle-blower or the media. We also need better oversight over when the criminal prosecution authorities decide to prosecute or not to prosecute, and the time taken to make such decision, particularly in cases involving PEPs and allegations of corruption.
Administrative process to recover funds: Administrative and civil processes must follow, after receiving early warning alerts and reporting of suspicious transactions. The existing process to recover stolen state funds should initiated sooner and used more extensively, as well as focusing on administrative disciplinary processes against officials who cannot explain income received from suspicious transactions.
International measures: those embarking on large-scale corruption, like the Guptas, generally try and hide their proceeds of corruption in foreign jurisdictions. The approach taken to recover funds worth $6.5bn in the Malaysian MDB scandal involved the co-operation of authorities from Switzerland, Singapore, USA and (later) Malaysia, and offers a good model to consider how to bring the Gupta family to justice.
Early warning and preventive systems: these can reduce the scope for corruption, and identify potentially corrupt transactions as soon as possible. The role of accounting officers, CEOs, CFOs and heads of procurement must be monitored more proactively.
I am copying this letter to South Africa’s Finance Minister and our HM High Commissioner in Pretoria, as well as to the Acting US Ambassador in London.
Lords Debate Magnitsky-style sanctions 24 June 2021
Speech by Lord Peter Hain
Why have London-based companies not been prosecuted for aiding and abetting corruption by former President Zuma and his corrupt business cronies the Gupta Brothers, Ajay, Atul and Rajesh? Why have UK and US sanctions against the Gupta brothers and Salim Essa not yet yielded results?
I first asked the Chancellor in September 2017 to take action, so why have HSBC, Standard Chartered and Baroda, all global banks based in London, functioning under UK laws and regulations, still not been prosecuted for facilitating gigantic money laundering by the Zuma family and the Gupta Brothers.
As Paul Holden from Shadow World Investigations demonstrated to the Commission of Inquiry into State Capture under Deputy Chief Justice Zondo, millions went via British banks and into a vast laundromat operated by Altaf Khanani, under investigation by the US for laundering money for global drug cartels and terrorist groups.
A recent University of Stellenbosch study indicates that South Africa lost R1.5trn (£750m) in the five years between 2014 and 2019 in looting and money laundering which for a relatively small economy emerging from decades of apartheid, is a massive cross to bear.
The Gupta family are reported to be either in Dubai (where they appear to reside) or in India (where they often visit). Dubai financial district styles itself as a 1960s/70s type Swiss bank secrecy jurisdiction, so why do the UK and US governments tolerate such blatant money-laundering by the Dubai authorities, supposedly allies? Further, it appears that the UAE does not extradite its own citizens, and it may well be that the Gupta brothers and their family have attained UAE citizenship (either by buying property, or some similar mechanism). SA authorities have secured an extradition treaty with Dubai or UAE, but are struggling to get the Dubai authorities to comply with the spirit of this.
Why does India not extradite the Gupta brothers, given that the SA authorities have now put two of the brothers and their wives on the Interpol list. Whilst one of the brothers (Ajay) is still said to be an Indian citizen, the second brother (Atul) did take out SA citizenship, and presumably gave up his Indian citizenship in the process. Why have the Indian authorities been invisible in dealing with the money laundering at the Bank of Baroda branch in Johannesburg, and why they have not taken strong regulatory action to demonstrate to all Indian banks that they will not tolerate such lax money laundering standards by their banks in their overseas operations?
Why also has Hong Kong not taken action over the many Gupta money laundering transactions through it?
Whilst the USA and UK have listed the Gupta family assets and are able to freeze them if deposited in USA or UK banks, will the Minister ensure that this listing applies to assets held in non-US or non-UK banks in UAE or India; or to arresting any members of the Gupta family were they to be on USA or UK territory.
I have today written to the Chancellor requesting urgent action and a meeting with South Africa’s Finance Minister to progress all this.
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