Standard Chartered Plc Chief Executive Officer Peter Sands hit back at a New York regulator’s claims the lender broke US sanctions, and challenged the accuracy of the watchdog’s assertions.
“We reject the position and portrayal of facts by the Department of Financial Services,” Sands said on a conference call with reporters on Wednesday, his first public comments since the findings were published on August 6. “It would be disproportionate and wholly inconsistent with the actions of other US authorities in other sanctions matters” to revoke the bank’s New York license, he said.
Standard Chartered has slumped about 16 per cent in London trading this week after New York regulator Benjamin Lawsky threatened to strip the bank of its license to operate in the state, alleging it processed $250 billion of deals with Iranian banks subject to sanctions.
The dispute is becoming increasingly political. Mayor of London Boris Johnson today accused New York of seeking to damage its biggest rival as a financial center, while Bank of England Governor Mervyn King criticised the regulator for failing to co- ordinate with its counterparts.
The stock rallied 7.1 per cent to 1,315.5 pence in London trading from 1,228.5 pence yesterday. The stock began trading on Wednesday without the right to the latest dividend. Excluding the effect of the dividend, the shares would have climbed 8.6 per cent.
The bank might be asked to pay as much as $700 million to resolve money-laundering allegations filed by New York’s banking superintendent after his department grew impatient with inaction by federal regulators, a person familiar with the case said.
Benjamin Lawsky, who runs the Department of Financial Services, tried unsuccessfully a few months ago to get US regulators to punish the London-based bank for conduct involving disguised Iranian money transfers, said the person, who asked not to be identified because the matter is confidential. The transfers have been under investigation by federal agencies for more than two years, according to Lawsky’s August 6 statement.
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“The order we received from the DFS came as a complete surprise,” Sands said on the call. “The surprise was in the manner of the announcement and that the DFS made an announcement on its own and without giving us prior notice. The resolution of such matters normally proceeds through a coordinated approach by the different agencies.”
Mervyn King today criticised Lawsky’s order, saying UK authorities would “ask that various regulatory bodies that are investigating a particular case try to work together.” Johnson used a column for the London-based Spectator magazine due to be published tomorrow to attack Lawsky.
“You can’t help wondering whether all this beating up of British banks and bankers is starting to shade into protectionism,” he wrote. “And you can’t help thinking it might actually be at least partly motivated by jealousy of London’s financial sector — a simple desire to knock a rival center.”
Sands, 50, said the investigation has been “very damaging” to the British lender’s brand and denied that there was anything wrong with the bank’s culture. He added that none of the transactions reviewed by the bank were linked to terrorist organisations.
Standard Chartered hired an external consultant to probe about 150 million payment transactions conducted between 2001 and 2007, Sands said.
The investigation is focusing on so-called u-turn transactions, which could allow an Iranian bank to access the US banking system indirectly through a third-party bank.
Transactions had to be initiated offshore by banks that were neither US nor Iranian and only passed through the US financial system on the way to other non-Iranian, non US banks. Standard Chartered broke the rules by stripping wire transfer orders involving its New York branch of any reference to the involvement of Iranian banks, the regulator said.
Fewer than 300 of the transactions, amounting to about $14 million, weren’t valid u-turns, Sands said on Wednesday.
“That is clearly wrong and we’re sorry that those mistakes occurred,” Sands said. “There was no systematic attempt to circumvent sanctions.”
A settlement of $700 million would match the amount that HSBC Holdings Plc set aside last month after a Senate committee found the bank gave terrorists, drug cartels and criminals access to the US financial system. A payment of that sum by HSBC would be the largest paid by any bank so far.
“Despite widespread distaste for the New York State Department’s conduct, a settlement may yet be seen as expedient,” said Ian Gordon, an analyst at Investec Plc in London with a buy rating on the stock. “Any settlement on broadly the above terms would, relative to alternatives, be taken with considerable relief by the markets.”