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South Africa: Money Laundering

Volume 785: debated on Thursday 19 October 2017


Asked by

To ask Her Majesty’s Government what action they are taking to prevent money laundering through British banks by families and businesspeople linked to the government of South Africa.

My Lords, the Government are committed to tackling corruption in the UK and overseas and preventing the proceeds of corruption from entering the UK’s economy. The recently introduced money laundering regulations set out strict rules that British banks must follow when doing business with those with links to prominent public functions that may expose them to risks of corruption. We are concerned about the allegations in South Africa, and the British high commission is monitoring the issue closely.

May I thank the Chancellor for ensuring that the Financial Conduct Authority, the Serious Fraud Office and the National Crime Agency investigate HSBC, Standard Chartered Bank and Baroda Bank, each of which expert South African whistleblowers have told me must have been conduits for the corrupt proceeds of money stolen from their taxpayers and laundered through Dubai and Hong Kong? In my letter of 25 September to the Chancellor, I supplied for investigation 27 names and personal identification numbers, including President Jacob Zuma, 11 members of his family, 11 members of his close friends, the Gupta family, and their five associates, together with 14 entities linked to the Guptas and suspected to have been set up for the purposes of transnationally laundering an estimated £400 million, or 7 billion rand, of their illicit proceeds. Will he ensure that those banks, together with the European banks—about which I have similarly written to Commission President Juncker—track down that laundered money, return it to the South African Treasury and supply evidence to its officials to enable the prosecution of all those connected with such corruption?

My Lords, we are grateful to the noble Lord for the persistence that he has shown on this issue and in drawing it to the Chancellor’s attention and to international attention. The UK has some of the toughest anti-money laundering laws in the world. We have been at the forefront of introducing them—whether it is the Criminal Finances Act this year or the fourth anti-money laundering directive. We realise that London, as the largest financial centre, is a target which can be used for this purpose, but we are determined to root it out. That is why, when we are provided with information—as when the noble Lord, correctly, wrote to the Chancellor setting out that detail—immediate action is taken to refer it to the relevant authorities to ensure that they can pursue the matter and that justice is done, and is seen to be done.

My Lords, as someone who is incredibly fortunate in having a family home in South Africa, in White River, in the province of Mpumalanga, I have seen at first hand the sheer beauty of this amazing country, its diversity and vibrancy and the determination of its people to overcome the many challenges that it faces. Does my noble friend agree with me that, with South Africa as a key trading partner in the region and a member of the Commonwealth, it is in our national interest to make sure that we strengthen our relationship with it?

Well it is certainly right—and I pay tribute to my noble friend for raising this issue—that South Africa is a country with incredible resources, not only naturally but in its people. It is the largest economy in the African continent and is the largest investor in the UK and largest trading partner in Africa for the UK. Whenever countries go through political difficulties, as they are in South Africa at the present time, we recognise that there is a long-term important relationship for the UK to maintain.

My Lords, this is another instance where the US regulators have been ahead of the curve of the UK regulators, even though it appears that London is part of the core allegations. It has happened before in money laundering—it was so evident in the LIBOR scandal. Will the Minister once again look at the resources available and the enforcement strength of our regulators? Will he also look again at the whistleblowing laws which, although improved, are still so weak and career ruinous that the regulator does not have access to information that it should be getting at a much earlier stage?

I do not accept that we are behind the curve on this. In many ways, the UK is leading the world: at the G20, in the Financial Action Task Force, and with the regulations that we have put in place and the reform of the Financial Conduct Authority. That is why this year the Financial Conduct Authority handed out one of the toughest fines ever levied—£163 million—to Deutsche Bank for failing to comply with up-to-date money laundering regulations. We are very tough on this, but we realise that you have to be vigilant all the time. Therefore, when issues are drawn to our attention, we respond to them quickly and appropriately.

My Lords, this is a very big issue in South Africa, and it will not do for the Government to suggest that they have their eye firmly on the ball. At last we are getting some response, but it is quite clear that a number of British banks have got very significant interests in South Africa. It is important that action is taken now to make sure that these banks are clear of this corruption and, if they are not, that action is taken against them. I urge the Minister to reinforce what he has said today elsewhere. It will not do Britain’s reputation any good at all for us to be tardy on this very significant issue.

I totally agree with the latter part of the noble Lord’s point. That is exactly why we have taken action in referring this matter to the Financial Conduct Authority. That is why we passed the Criminal Finances Act in April this year and introduced the tough new anti-money laundering regulations in July this year. That is why we introduced, just yesterday in your Lordships’ House, the Sanctions and Anti-Money Laundering Bill, which my noble friend Lord Ahmad will take through the House. We are taking this very seriously because we realise the consequences of not doing so for the reputation of the City of London and the UK.

My Lords, in light of the endemic corruption of the state in South Africa, what are Her Majesty’s Government doing to deal with the broader issue of state capture, a term used to describe the misappropriation of state funds by a power clique?

I think the other point to recognise is that in South Africa there are democratic processes and systems of law. The parliamentary inquiry is now under way into state capture by the specific companies that were referenced. A judicial commission of inquiry into state capture has been proposed but has yet to start to take evidence. We recognise that South Africa needs to go through its processes to find out what happened and who is responsible so that action can be taken, both domestically and internationally.