Standard Chartered Accused Of Hiding $250 Billion In Iranian Transactions

Standard Chartered plc may be suspended from doing business on Wall Street indefinitely, reported the New York Times on Monday, after New York’s top banking regulator, the New York State Department of Financial Services (DFS), accused the British bank of hiding nearly $250 billion in financial transactions to Iran that were in clear violation of U.S. law.

Standard Chartered plc may be suspended from doing business on Wall Street indefinitely, reported the New York Times on Monday, after New York’s top banking regulator, the New York State Department of Financial Services (DFS), accused the British bank of hiding nearly $250 billion in financial transactions to Iran that were in clear violation of U.S. law.

According to a 27-page statement by the DFS, Standard Chartered Bank (SCB) had “schemed” with the government of Iran for over a decade in order to conduct more than 60,000 secret transactions, which had reaped “hundreds of millions of dollars in fees” for SCB and “ left the U.S. financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes.”

The DFS further added that SCB had falsified business records, offered false instruments for filing and evaded federal sanctions in order “to make hundreds of millions of dollars at almost any cost;” and recommended that SCB’s license to operate in New York should be revoked in addition to fines sanctioned against the company.

Describing the bank as a “rogue institution”, the DFS went on to detail numerous suspect transactions between SCB and a number of Iranian clients, including the Central Bank of Iran, Bank Saderat and Bank Melli.

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According to the banking regulator, SCB may have also operated “similar schemes” to do business with other countries faced with United States sanctions, including Myanmar, Libya and Sudan.

[quote]“SCB intentionally withheld material information from New York and Federal regulators in its effort to service Iranian Clients,” wrote the report. “SCB carefully planned its deception and was apparently aided by its consultant Deloitte & Touche, which intentionally omitted critical information in its ‘independent report’ to regulators.”[/quote]

After reviewing over 30,000 internal memos at the bank, the DFS also discovered that an executive at SCB’s New York branch had written a “panicked message” to the bank’s headquarters in London, warning that the Iranian dealings could cause “catastrophic reputational damage” and “serious criminal liability.”

[quote]However, SCB’s Group Executive Director at that time replied caustically:  “You f—ing Americans.  Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians?”[/quote]

In a statement directed at SCB, Benjamin Lawsky, superintendent of the DFS, challenged the bank to “demonstrate why [their] licence to operate in the State of New York should not be revoked,” and why its $190 billion dollar clearing operations in the state should not be suspended immediately.

Lawsky also ordered SCB’s executives to “appear and explain apparent violations of law,” and said that a hearing would soon be conducted to determine financial penalties.

SCB is the third British bank to be investigated by U.S. financial regulators this year for illegal money laundering activities. In June, Barclays Plc agreed to pay $453 million to settle U.S. and UK probes that it rigged a global benchmark in June, while HSBC is believed to have set aside $2 billion in order to pay off fines to both U.S. and U.K. regulators.

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In a statement to the press, SCB said that it “strongly rejects the position and portrayal of facts made by the New York State Department of Financial Services.”

The British bank said that it “ceased all new business with Iranian customers in any currency over five years ago,” and that it had “made presentations to the DFS and other US agencies concerning the strength of its global sanctions compliance programme during the period under review and through to the present day.”

[quote]“The Group was therefore surprised to receive the order from the DFS, given that discussions with the agencies were ongoing,” said SCB. “We intend to discuss these matters with the DFS and to contest their position.”[/quote]

Nevertheless, Christopher Wheeler, a Mediobanca SpA analyst in London, believes that the latest scandal would prove to be “rather tricky for the management team at Standard Chartered,” who have been at the company “for years.”

The current chief executive, Peter Sands, was promoted to the top job from finance director in November 2006. His predecessor, Lord Mervyn Davies, was also the former labour minister of the U.K.

[quote]“It’s too early to say who will fall on his sword as it depends on what is found, but it really doesn’t look good,” Wheeler told Bloomberg.[/quote]

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According to Reuters, Standard Chartered’s stock fell 8 percent in the final 15 minutes of trading in London amid reports of the U.S. probe.

Representatives from the bank, including Chairman John Peace, CEO Peter Sands and Finance Director Richard Meddings, declined to comment beyond the bank’s brief statement; while Standard Chartered’s largest shareholder, the Government of Singapore-owned Temasek Holdings, has also yet to comment on the scandal.

Read the full report by the New York State Department of Financial Services here

Read Standard Chartered’s full statement here