The New York State Department of Financial Services (DFS) said on Monday that Standard Chartered “schemed” with the Iranian government and hid from law enforcement officials some 60,000 secret transactions to generate hundreds of millions of dollars in fees over nearly 10 years.
The British bank, which the regulator called a “rogue institution” also exposed the U.S. banking system to terrorists, drug traffickers and corrupt states, the DFS said.
London-based Standard Chartered was surprised by the statement, even though it has been in talks with U.S. regulators over the matter for years. Its shares were 18.4 percent lower at 12.00 pounds by 0820 GMT on Tuesday.
The shares had already fallen 6.2 percent on Monday, sliding on the close just as the news emerged.
The regulator’s move is a savage blow to Standard Chartered, which has been one of the banks least tarnished during the financial crisis thanks to its focus on Asia and other emerging markets and a conservative capital and liquidity approach.
A top 40 investor in the British bank said he did not expect it to be a lasting problem given the bank’s robust defence, but added: “Given that the shares are not especially cheap, particularly in relative terms, it may be the shares remain in the doldrums for a while now that their blameless reputation has suffered a knock.”
Standard Chartered said the bank “does not believe the order issued by the DFS presents a full and accurate picture of the facts.”
The loss of a New York banking license would be a devastating blow for a foreign bank, effectively cutting off direct access to the U.S. bank market. Standard Chartered processes $190 billion every day for global clients, the New York bank regulator said.
In an unusual look inside a bank, the New York regulator described how Standard Chartered officials debated whether to continue Iranian dealings.
In October 2006, the top official for business in the Americas, whom the regulator did not name, warned in a “panicked message” that the Iranian dealings could cause “catastrophic reputational damage” and “serious criminal liability.”
A top executive in London shot back: “You f—ing Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians.” The reply showed “obvious contempt for U.S. banking regulations,” the regulator said.
Standard Chartered is the third British bank to be ensnared in U.S. law enforcement probes this summer. Barclays Plc agreed to pay $453 million to settle U.S. and UK probes that it rigged a global lending benchmark in June.
A month later, a U.S. Senate panel issued a scathing report that criticized HSBC Holding Plc’s efforts to police suspect transactions, including Mexican drug traffickers.
Standard Chartered said it shared with U.S. agencies an analysis that demonstrated it “acted to comply, and overwhelmingly did comply” with U.S. regulations. Standard Chartered put the total value of Iran-related transactions that did not follow regulations at less than $14 million.
“The group was therefore surprised to receive the order from the DFS, given that discussions with the agencies were ongoing,” Standard Chartered said. “We intend to discuss these matters with the DFS and to contest their position.”
Standard Chartered, a financier in emerging markets, is the sixth foreign bank since 2008 to be implicated in dealings with sanctioned countries such as Iran in investigations led by federal and New York law enforcement officials.
Four banks — Barclays, Lloyds, Credit Suisse Group and ING Bank — have agreed to fines and settlements totaling $1.8 billion. HSBC currently is under investigation by U.S. law enforcement, according to bank regulatory filings.
The New York regulator, headed by former prosecutor Benjamin Lawsky, ordered Standard Chartered to explain why the bank should not lose its state license and the ability to process dollar transactions. Lawsky also ordered the bank to bring in an outside consultant to monitor its transactions.
“Standard Chartered Bank operated as a rogue institution,” Lawsky said in the order. DM
Photo by Reuters
Support DAILY MAVERICK & get FREE UBER vouchers every month
An increasingly rare commodity, quality independent journalism costs money, though not nearly as much as its absence can cost global community. No country can live and prosper without truth - that's why it matters.
Every Daily Maverick article and every Scorpio exposé is proof of our dedication to this unshakeable mission. Investing in our news media is by far the most effective investment into South Africa's future.
You can support Independent and Investigative journalism by joining Maverick Insider. If you contribute R150 or more per month you will receive R100 back in UBER vouchers. EVERY MONTH until October 2019.
So, if you'd like to help and do something meaningful for yourself and your country, then sign up to become a Maverick Insider. Together we can Defend Truth.
"I feel like we should stop calling feminists 'feminists' and just start calling people who aren't feminist 'sexist' – and then everyone else is just human." ~ Maisie Williams