The UK Treasury has asked the Serious Fraud Office and financial regulators to investigate whether HSBC and Standard Chartered might be linked to a 'state capture' corruption scandal that has swept across South Africa in recent months.
The FBI has also begun probing US links to the scandal, which revolves around South Africa President Jacob Zuma and the Gupta family, powerful businessmen who through their Sahara Group employ around 10,000 workers in the media, mining, travel, energy and technology sectors.
Lord Hain, the former Northern Ireland Secretary, had previously written to Chancellor Philip Hammond to flag concerns that the two British banks may "inadvertently have been conduits" for laundered money via Hong Kong and Dubai.
The Labour peer is expected to raise the issue of the House of Lords on Thursday (19 October), but the Treasury has already passed his comments on to the SFO and the Financial Conduct Authority.
"We take allegations of financial misconduct very seriously, and have passed Lord Hain's letter on to the Financial Conduct Authority and relevant UK law enforcement agencies, including the National Crime Agency and Serious Fraud Office, to agree the right action," a spokesperson for the Treasury said.
A prominent anti-apartheid campaigner, Lord Hain, who grew up in South Africa, has urged British authorities to "to track that stolen money down and make sure that British financial institutions help return it to South African taxpayers".
A spokeswoman for the FCA said the banks named by Lord Hain had already been contacted and that it "considers carefully further responses received".
A series of leaked emails and official investigations accuse brothers Ajay, Atul and Rajesh Gupta of buying influence in the South African government in order to loot state businesses. It is alleged huge sums of capital were taken out of South Africa via Hong Kong and Dubai.
The Guptas and Zuma have protested their innocence, claiming they are victims of "politically motivated witch-hunt". Critics and opposition politicians allege that Zuma is directly controlling the state investigatory apparatus through key appointments.
The scandal has already claimed high profile scalps, with auditing firm KMPG removing its top executive from the country.
Public relations giant Bell Pottinger was expelled from the UK's Public Relations and Communications Association trade body for five years due to its work on pushing a divisive narrative of "white monopoly capital" in South Africa.
Through its "economic emancipation" campaign for Gupta-owned Oakbay Capital, Bell Pottinger reportedly targeted wealthy white South African individuals and business via a combination of traditional and social media, which included a fake blog and Twitter account.
The alleged aim was to drum up anger about "white monopoly capital" and "economic apartheid" to shift the focus away from the Gupta family. The firm, which counted HSBC among its clients, has seen its second largest shareholder walk away in the wake of the scandal.
Meanwhile, according to the Financial Times, the FBI probe has so far focused on Ashish and Amol Gupta, the nephews of the South Africa-based brothers. The Guptas reportedly wanted to employ the duo, who are US citizens, in 2013.
The US-based Guptas are listed as directors Brookfields Consultants, which in 2014 received payments from Accurate Investments, a firm based in the United Arab Emirates with close ties to the Gupta family.
Separately, South African non-profit organisation Corruption Watch has urged the US Department of Justice to investigate whether consulting giant McKinsey breached the US Foreign Corrupt Practices Act.
The firm was embroiled in the same scandal as KPMG and admitted it should not have worked alongside a company owned by one of the Guptas associates until completing due diligence on its ownership.
However, following an internal investigation, the firm has stated there was no evidence of bribery or corruption.