Emerging markets focused banking titan Standard Chartered has been called to task by the US banking regulator for alleged collusion with the government of Iran to hide transactions from the US authorities.
According to the notice served on Standard Chartered Bank (SCB), a wholly owned subsidiary of Standard Chartered: "For almost ten years, SCB schemed with the government of Iran and hid from regulators roughly 60,000 secret transactions, involving at least $250bn, and reaping SCB hundreds of millions of dollars in fees. SCB'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."
The New York State Department of Financial Services made the accusation after an extensive probe which included the review of more than 30,000 pages of documents, including internal SCB e-mails "that describe wilful and egregious violations of law."
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SCB has now been called upon to explain apparent violations of the law in a bid to save its New York banking licence. Additionally, the New York authorities want a good reason why SCB's US dollar clearing operations should not be suspended, pending a formal licence revocation hearing; the department also wants SCB to pay for an independent, on-premises monitor of the Department's selection to ensure compliance with rules governing the international transfer of funds.
Standard Chartered, the parent group, reiterated that it is conducting a review of its historical US sanctions compliance and is discussing that review with US enforcement agencies and regulators. This review focuses primarily on transactions relating to Iran in the period 2001-2007, and in particular, their compliance with the U-turn framework established by the US authorities to enable ongoing US dollar trade with Iran by other countries.
It has refuted the allegations made by the New York State Department of Financial Services (DFS). The analysis that the group shared with all the US agencies demonstrates that throughout the period the group acted to comply, and overwhelmingly did comply, with US sanctions and the regulations relating to U-turn payments, the bank claims.
"As we have disclosed to the authorities, well over 99.9% of the transactions relating to Iran complied with the U-turn regulations. The total value of transactions which did not follow the U-turn was under $14m," Standard Chartered asserts.
Standard Chartered believes that the interpretation reflected in the DFS's order of the U-Turn exemption is "incorrect as a matter of law". The banking group's review of its Iranian payments also did not identify a single payment on behalf of any party that was designated at the time by the US Government as a terrorist entity or organisation.
"We intend to discuss these matters with the DFS and to contest their position," the Standard Chartered statement said. Nevertheless, the bank's shares took a dive in Hong Kong trading after news of the allegations broke and also opened sharply lower in London.
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