South Africa's Gupta family used HSBC Holdings PLC bank accounts in Dubai to transfer millions of dollars through companies that have been linked to suspected kickbacks for the sale of Chinese locomotives, according to documents reviewed by The Wall Street Journal.
The documents show money moving among three United Arab Emirates-based firms in January and February 2013 through HSBC accounts while one of the firms was receiving payments from a Chinese rail company with a contract to sell locomotives to a South African state-owned enterprise.
One of the documents, a spreadsheet of bank transactions, shows that the transfers among U.A.E.-based firms were made in dollars and cleared by HSBC in New York.
The spreadsheet and other documents cited in this article were among a trove of emails, bank statements and other documents that appear to have been obtained from Gupta-controlled companies earlier this year. The documents have buttressed longstanding suspicions among many South Africans that the powerful business clan leveraged its connection to President Jacob Zuma and other government officials to amass great personal wealth.
They also underscore the risks for banks of processing potentially illicit money flows.
HSBC said it is determined to keep criminals out of the financial system. It said it "has been reviewing its exposure to the Guptas for some time, and has closed a number of accounts for associated front companies wherever we have found them."
"This is inherently challenging because those who seek to launder money are often extremely sophisticated, hiding behind legitimate companies, layers of front companies, connected parties and individuals that have controlling interests in the subject companies," HSBC said.
South Africa's amaBhungane Centre for Investigative Journalism published documents in June showing the Guptas were involved in arranging the contacts between CSR Zhuzhou Electric Locomotive Co., a subsidiary of China's state-owned CRRC Group, and South African rail-and-port operator Transnet. It said the documents present evidence Gupta family companies received kickbacks of around 20% on three locomotive deals from CSR and other CRRC subsidiaries.
CRRC Group didn't respond to a request for comment.
South African police and prosecutors have said they are investigating allegations of wrongdoing by people and companies with ties to the Guptas, including potential kickbacks from international companies.
The Guptas, who didn't respond to a request for comment for this article, have previously denied wrongdoing. Atul Gupta, who leads the family's businesses, has said without elaboration that "there is no authenticity" to the documents, which have been dubbed #GuptaLeaks in South Africa. Mr. Zuma has also denied wrongdoing.
The possible role of U.K. banks in Gupta-related business was raised in October by Peter Hain, a former cabinet minister and a member of the U.K.'s House of Lords. At the time, the U.K. financial regulator said it had already asked two banks named by Lord Hain, HSBC and Standard Chartered PLC, to review possible Gupta-related business.
Standard Chartered said it shut down some accounts linked to the Guptas in 2014 after an internal investigation.
In a letter sent last week to U.K. Treasury chief Philip Hammond and seen by the Journal, Lord Hain accused HSBC of sanctioning money laundering. He alleged that accounts with U.K.-based HSBC in Dubai and Hong Kong were used for Gupta money transfers out of South Africa. He told Mr. Hammond that some of the transactions had been flagged as suspicious by HSBC staff, but "I am informed that they were told by HSBC UK to ignore it."
HSBC denies that it sanctioned money laundering. HSBC has spent billions of dollars improving its financial crime-fighting systems and hired thousands of compliance staff since paying $1.9 billion in 2012 to settle U.S. allegations of money laundering and sanctions breaches. Under the terms of a five-year deferred prosecution agreement, part of that settlement with the Justice Department, it must raise its standards to an agreed level or face an extension of the agreement, additional conditions or criminal prosecution.
The transactions in the #GuptaLeaks spreadsheet could draw scrutiny from U.S. authorities, since they are listed as having been made in dollars and cleared by HSBC in New York.
The Federal Bureau of Investigation is examining funds involving Gupta-linked businesses that may have traveled through the U.S. financial system, and the role any U.S. companies may have played, according to people familiar with the matter.
The spreadsheet shows a total of $2 million moving from two U.A.E. companies--Century General Trading FZE and JJ Trading FZE--to a third U.A.E. company, Global Corporation LLP, in January and February 2013.
The three companies appeared to be controlled by the Guptas, according to correspondence and financial data in the #GuptaLeaks documents. Century General Trading and JJ Trading didn't respond to calls seeking comment. Global Corporation couldn't be reached for comment.
Other #GuptaLeaks documents show that Century General Trading had another lucrative stream of revenue at the time. In October 2012, Chinese rail company CSR signed a 2.69 billion rand ($190 million) deal with South African state-owned Transnet for 95 locomotives. As part of the deal, CSR pledged to pay 20% of its proceeds, or 537.3 million rand, to Century General Trading, according to a table setting out the payments the firms were to receive from the Chinese company.
Transnet said it is investigating the procurement processes for the locomotive deals. Emails from the months preceding the deal show that the Guptas and companies they controlled were involved in arranging the agreement. One email chain from January 2012 shows that CSR directors forwarded a letter to the Transnet chief executive seeking participation in the locomotive tender to several employees and executives at Gupta-owned companies.
The transactions processed via HSBC accounts in early 2013 are part of much-larger money flows due to JJ Trading and Century General Trading in the years to come. One document states that by 2015, the two companies were entitled to 5.27 billion rand in payments from CSR, as the Chinese company went on to win two more tenders with Transnet, for 100 and 359 locomotives, respectively. The funds from the later deals, between 20% and 21% of the total proceeds, had been promised to JJ Trading, according to the document.
It is unclear how payments after February 2013 were processed. The JJ Trading and Century General Trading accounts with HSBC were shut down in 2014.