Call from shadow chancellor John McDonnell comes amid continuing fallout from the Gupta scandal in South Africa

The shadow chancellor, John McDonnell, has called for an inquiry into London’s role in global money laundering, amid concern about UK banks’ exposure to a corruption investigation into ties between South Africa’s wealthy Gupta family and President Jacob Zuma.

Speaking after it emerged that the FBI is to examine any links between US companies and individuals to the Gupta affair (£), McDonnell said London had become “notorious” as a centre for money-laundering.

Q&A Who are the Gupta brothers? Show Hide Ajay, Atul and Rajesh Gupta are Indian-born entrepreneurs at the centre of a corruption investigation in South Africa. The brothers, who moved to South Africa in 1993, have denied a string of allegations about alleged corruption. The key allegation levelled against them is that they have used their ties to Jacob Zuma, the country’s president, to advance their own business interests. The scandal has already claimed the scalp of UK public relations firm Bell Pottinger. It went into administration after it was accused of deliberately stirring up racial tensions in South Africa while working for a Gupta holding company, Oakbay Investment.

The warning comes after the Guardian revealed that the chancellor, Philip Hammond, has asked UK authorities to look into whether HSBC and Standard Chartered were involved in transactions related to the Guptas.

Standard Chartered said on Thursday it had closed bank accounts in 2014 due to concerns about potential links to the scandal. HSBC has yet to comment.

The potential involvement of UK banks was first raised by former Labour cabinet minister Peter Hain, who grew up in South Africa and was a prominent anti-apartheid activist.

Lord Hain called on the chancellor last month to ask UK authorities to examine transactions involving 27 people and 14 companies, including Zuma and Gupta family members.

Facebook Twitter Pinterest John McDonnell, the shadow chancellor. Photograph: Victoria Jones/PA

He followed up his concerns on Thursday by asking in the House of Lords for an update on the government’s progress in investigating bank accounts “suspected to have been set up for the purposes of transnationally laundering an estimated £400m [...] of their illicit proceeds”.

Hain said UK banks “must have been conduits for the corrupt proceeds of money stolen from [South African] taxpayers and laundered through Dubai and Hong Kong”.

Speaking after Hain’s question, Lord Davies warned the government it must act fast to ensure the UK’s reputation as a financial centre is not affected.

“It’s quite clear that a number of British banks have got clear and significant interests in South Africa,” Lord Davies said.

“It’s important now that action is taken to make sure these banks are clear of this corruption and, if not, that action is taken against them.

“It will not do Britain’s reputation any good at all to be tardy on this very significant issue.”

Speaking on behalf of the government, Conservative life peer Lord Bates said: “We’re taking this very seriously because we realise the consequence of not doing so for the reputation of the City of London and the UK.”

In a statement following Hain’s intervention in the House of Lords, McDonnell called on the government to consider a wide-ranging review into the role of UK financial institutions in global corruption.

“This is the third high-profile money-laundering scandal to involve major British banks this year, and London has become notorious as a global centre for money laundering,” he said

“There are many hardworking people in our banking sector who will feel frustrated and dismayed by such stories, but they are let down by poor leadership and weak oversight that undermines the financial sector’s reputation.



“It’s time the chancellor considered a wide-ranging independent inquiry that leaves no stone unturned in rooting out unlawful and damaging activity.

“The government cannot continue to drag its feet on this matter as it will be the British banking industry as a whole that risks long-term damage to the reputation on which it depends.”



Facebook Twitter Pinterest Ajay Gupta and younger brother Atul Gupta. Photograph: Gallo Images/Getty Images

The chancellor has asked the Serious Fraud Office, National Crime Agency and the Financial Conduct Authority to seek information from HSBC and Standard Chartered about their potential involvement with transactions related to the Guptas.

“We are not able to comment on the details of client transactions but can confirm that following an internal investigation accounts were closed by us in 2014,” said Standard Chartered.

It did not comment on the nature of the transactions but it is believed to have had concerns about indirect links to the Guptas, rather than accounts held at the bank.

The inquiry into links between the Guptas and Zuma, a longstanding relationship known colloquially as “Zupta” in South Africa, has also attracted FBI attention, it emerged on Thursday.

US investigators have begun investigating individuals, bank accounts and companies potentially linked to the scandal, according to the Financial Times.

Zweli Mkhize, the treasurer general of South Africa’s ruling ANC party – and one of the most senior officials in the organisation – welcomed the international dimension to the investigation.

“If there is any information suggesting corruption or irregularities it needs to be investigated across the borders, not to be restricted to South Africa,” he said.

“We may not be aware of the exact issues for companies not within South Africa but we will welcome any information that might help to shed light on what is happening in our country if it arrives from other countries.

“So if the UK and US authorities are involved in an investigation we will keep ourselves interested in anything that involves companies that ultimately work in South Africa.”

The “Guptagate” affair has already claimed the scalp of UK public relations firm Bell Pottinger, which counted Gupta holding company Oakbay Investments as a client. Its business collapsed when it was struck off by the UK PR industry body for its work with Oakbay.

The South African bosses of accounting firm KPMG, which audited Gupta family businesses, also quit amid the fallout from the affair.