Standard Chartered Plc conducted $250 billion worth of transactions with Iranian entities over more than seven years in violation of federal money laundering laws, a New York regulator said in an order warning that its US unit may be suspended from doing business in the state.
Standard Chartered earned hundreds of millions of dollars in fees for handling transactions on behalf of Iranian institutions that are subject to US economic sanctions, the Department of Financial Services, run by Benjamin Lawsky, said on Monday. The London-based bank, which generates almost 90 per cent of its profit and revenue in Asia, Africa and the Middle East, was ordered by the agency to hire an independent, on-site monitor to oversee its operations in the state.
According to the order, when the head of the bank’s US operations warned his superiors in London in 2006 that Standard Chartered’s actions could expose it to “catastrophic reputational damage,” he received a reply referring to the US unit’s employees with an obscenity.
“Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians?” a bank superior in London said, according to the New York regulator’s order.
Standard Chartered fell 6.2 per cent to 1,470 pence in London trading, its biggest drop in almost 12 months. The shares had risen 11.2 per cent this year before today, making it the third-best performing British bank stock after Lloyds Banking Group Plc and HSBC Holdings Plc.
Tim Baxter, a spokesman for Standard Chartered in London, declined to comment on the New York order. The bank said Aug. 1 that it’s “conducting a review of its historical US sanctions compliance and is discussing that review with US enforcement agencies and regulators.”
Standard Chartered handled transactions involving Iranian entities such as the Central Bank of Iran, Bank Saderat and Bank Melli, according to the regulator’s order. Lawsky’s agency is also investigating similar transactions between Standard Chartered and entities in other US sanctioned countries, including Libya, Myanmar and Sudan, according to the filing.
Standard Chartered opened its Iran office in 1993. Ten years later, the lender said “cross-border trade flows with markets like Turkey, Afghanistan, Iraq and Iran appear to be growing and offer potential to us.”
The bank stopped all new business in Iran in May 2007 and pulled out completely in May 2012.
Standard Chartered’s New York operation had $40.8 billion of assets at the end of March, according to the regulator. By comparison, the bank had $624 billion in assets at the end of June.
US Senate investigators said in a report earlier this year that London-based HSBC Holdings Plc concealed transactions that bypassed US sanctions against Iran.
Lawsky said the unit of the London-based bank was “apparently aided” by its consultant Deloitte & Touche LLP, which hid details from regulators, and despite being under supervision by the Federal Reserve Bank of New York and other regulators for other compliance failures.
The bank’s actions “left the US financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes, and deprived law enforcement investigators of crucial information used to track all manner of criminal activity,” Lawsky said in an order made public on Monday.
“In short, Standard Chartered Bank operated as a rogue institution,” Lawsky added.
The Iranian Embassy in Washington, DC was not immediately available for comment. A US Department of Justice spokeswoman declined to comment on whether that agency is conducting its own probe. Removal of a US banking license could be unprecedented, and the threat of losing it could force Standard Chartered into at least paying a large fine and adopting compliance reforms.
