* FirstRand defends right to close accounts
* Gupta family lawyer says will challenge allegations (Recasts with FirstRand closure of Gupta accounts)
By Mfuneko Toyana and TJ Strydom
JOHANNESBURG, Dec 5 (Reuters) - South African lender FirstRand said on Monday suspicions of money-laundering lay behind its decision to cut ties with a business family linked to allegations of influence-peddling in President Jacob Zuma's government.
FirstRand, South Africa's biggest bank by market value, is the first lender to publicly disclose reasons for severing links earlier this year with Oakbay Investments, a company controlled by the Gupta brothers.
The Gupta family, whose businesses range from media to mining, and Zuma have repeatedly denied wrongdoing. The Guptas' lawyer said on Monday suspicions of money-laundering were groundless.
In an affidavit seen by Reuters, dated Nov. 29, FirstRand Chief Executive Johan Burger said his company had closed Oakbay bank accounts to comply with international regulations.
"These practices and standards require us to take steps to prevent FirstRand being used for money-laundering and other unlawful activities," Burger says in the court papers.
The Gupta family lawyer, Gert van der Merwe, told Reuters it took the accusations of money-laundering seriously and that it would deal with them in its own court application, to be filed by the end of the year.
"We want the real reasons for closing the accounts, not sweeping statements," van der Merwe said.
"They've not disclosed any real reasons to show my clients are politically exposed people."
Between December 2015 and April this year, all four major banks, also including Standard Bank, Nedbank and Barclays Africa, terminated the accounts of companies controlled by the Gupta family without making their reasons public.
FirstRand's court filing is in support of October's application by Finance Minister Pravin Gordhan asking a court to declare he could not interfere with the decisions by the banks.
Barclays and Nedbank said they would file legal applications similar to FirstRand's some time this week.
Last week Zuma sent back to parliament an anti-money-laundering bill that would have increased scrutiny of the bank accounts of "prominent individuals", including himself. He declined to sign it into law, saying it might not be constitutional.
A report by the Public Protector, released on Nov. 2, focused on allegations that businessmen Ajay, Atul and Rajesh Gupta had tried to influence the appointment of ministers. Zuma and the Gupta brothers have denied all the accusations.
The report called for a judicial inquiry to be set up by the president and for a judge to be appointed by the chief justice within 30 days of its release.
Zuma has described it as "unfair" and last week launched a court bid to have it set aside. On Monday the opposition Democratic Alliance asked the constitutional court to compel the leader to appoint a judicial inquiry as recommended by former Public Protector Thuli Madonsela. (Additional reporting by Olivia Kumwenda-Mtambo; editing by Tiisetso Motsoeneng and Andrew Roche)