Barclays Probes Alleged Money Laundering at South Africa Arm

Updated on
  • Regulators aware of `potentially fraudulent' activity at Absa
  • Bank said it is probing Absa Bank money transfers abroad

Barclays Plc identified potential money laundering linked to currency transactions at its business in South Africa, where the British lender plans to wind down its investment.

Absa Bank Ltd., the South African subsidiary of Barclays Africa Group Ltd., “has identified potentially fraudulent activity by certain of its customers using import advance payments to effect foreign-exchange transfers from South Africa to beneficiary accounts located in Asia, the U.K., Europe and the U.S.,” the London-based bank said in its annual report on Tuesday.

"The group is conducting a review of relevant activity, processes, systems and controls" and has made regulators aware of the of the suspected wrongdoing, Barclays said.

The investigation is a setback for new Chief Executive Officer Jes Staley, who is trying to draw a line under a string of scandals including the bank’s involvement in foreign-exchange manipulation and Libor rigging. Barclays was fined 10 million rand ($640,000) in 2014 after South Africa’s central bank found deficiencies in its controls to combat money laundering and terrorist financing. The lender said Tuesday it will sell down its 62 percent stake in Johannesburg-based Barclays Africa over the next two to three years.

Maria Ramos, chief executive officer of Barclays Africa, said on a call with reporters that the probe isn’t linked to a wider investigation into whether banks including Barclays colluded to rig the rand, and that it’s too early to give any further information.

Portuguese Probe

The bank also said the Portuguese Competition Authority is investigating whether Barclays infringed competition laws by exchanging information about retail credit products with 14 other banks over 11 years. Barclays said it’s cooperating with the investigation.

Barclays is also among global banks being probed by the Securities and Exchange Commission and the U.S. Department of Justice in relation to its hiring practices in Asia.

Global banks’ hiring practices have come under scrutiny after the U.S. opened an investigation in 2013 into whether JPMorgan Chase & Co. violated anti-bribery laws by employing children of China’s elite. Banks are being probed for giving jobs to candidates related to powerful Asian business leaders and government officials in order to generate business in corporate dealmaking. No one has been charged with any wrongdoing.

Barclays paid 1.5 billion pounds ($2.1 billion) for rigging currency markets last year, following a 290 million-pound penalty in 2012 for manipulating benchmark interest rates. The bank remains under investigation in Britain for its 2008 capital raising from Qatari investors, and the U.S. is probing allegations of misconduct tied to its dark pool stock-trading venue.

In a letter to shareholders, Barclays Chairman John McFarlane said that "excessive" regulatory fines had forced the bank to shrink its operations, reducing its support for the U.K. economy.

"The societal costs of excessive penalties is very real," McFarlane wrote. "A 50-million-pound fine or penalty is the equivalent of employing 1,000 fewer employees, closing 100 small regional branches, or foregoing the capacity to lend over 500 million pounds to small businesses or consumers."