STANDARD CHARTERED has agreed to a New York Department of Financial Services demand that the bank hire an outside monitor to ensure compliance with US anti-money-laundering laws. The agreement on the monitor, mandated by the regulator on August 6th, stems from negotiations between the bank and state officials ahead of a hearing on Wednesday.
New York banking superintendent Benjamin Lawsky alleged London-based Standard Chartered flouted US banking laws as part of a decade-long deception, helping to launder about $250 billion (€203 billion) in Iranian funds in contravention of US statutes.
Mr Lawsky is said to be seeking as much as $700 million to settle the investigation, another person familiar with the case said.
The regulator’s threat panicked investors, sent its share price down about 16 per cent the day after and provoked a defiant response from chief executive Peter Sands, who said the vast majority of wire transfers identified by Mr Lawsky complied with federal law.
According to the terms of the order, the regulator will select the monitor and the bank will pay for it and provide access to records.
Mr Lawsky has not yet decided which outside monitors should be hired, a source said.
The bank, which had $17.6 billion in income and $5 billion in profit last year, has $40.8 billion in assets associated with its New York branch, according to Mr Lawsky. He said in the order that Deloitte and Touche, hired by Standard Chartered to provide an independent report to regulators, complied with a bank request to remove from a draft “any reference to certain types of payments that could ultimately reveal SCB’s Iranian U-turn practices”.
Mr Lawsky said Deloitte’s actions “apparently aided” the bank with its effort to hide dealings with Iran in the “key period”, 2004-2007. Deloitte denies this.
The New York regulator has grounds to shut Standard Chartered in the state even if he accepts the firm’s argument that it illegally laundered only a fraction of the $250 billion he claims.
As the state’s top banking regulator, Mr Lawsky has power to act in his discretion against any financial institution he deems untrustworthy, according to the charter of his year-old department.
Since Mr Lawsky’s order, Standard Chartered has focused its defence on the amount it laundered, saying it involved less than 1 per cent of the 60,000 Iranian wire transfers asserted by Mr Lawsky. Even if Standard Chartered’s position is legally sound, the order’s disclosure of internal e-mails suggesting a conspiracy to hide the identity of Iranian clients from regulators has given Mr Lawsky grounds to act, according to legal experts. – (Bloomberg)
