Standard Chartered bank has been accused by New York bank regulators of hiding more than 60,000 transactions for Iranian banks and corporations. The New York State Department of Finance Services (FDS) characterised the bank as a "rogue institution".
The accusations have seen the bank's share price slump. According to the Guardian, more than £11.5 billion has been wiped off the bank's stock market value. Investors have evidently taken fright at the regulator's claim that the actions of the Standard Chartered has rendered the US "vulnerable to terrorists, weapon dealers, drug kings and corrupt regimes."
Standard Chartered senior management vehemently denied the charges, claiming that the regulator's portrayal is neither full nor accurate. The denial has, however, failed to reassure investors, doubtless aware of HSBC's potential billion dollar fine due to similar allegations which emerged from the US Senate two weeks ago.
The US regulator's report makes damning reading. According to the New York Times, when the bank’s chief executive for the Americas wrote to his bosses in London that the transactions had “the potential to cause very serious or even catastrophic reputational damage to the group", an unnamed director in London responded:
Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians.
The report in the Guardian includes the previous sentence, which is rather more colourful and makes it plain that the "you" refers to Americans.
According to the Daily Telegraph, the New York State Department of Finance Services (DFS) has called on Standard Chartered to explain why it should not be banned from operating on Wall Street. It is also clear that DFS is considering imposing a financial penalty. The Federal Bureau of Investigation (FBI) also stated that it has an open investigation into money laundering at Standard Chartered.
The DFS nine month investigation has involved the examination of more than 30,000 documents, including internal emails. The investigation shows the bank had similar schemes for other regimes subject to US sanctions and that Standard Chartered reaped hundreds of millions in fees from handling these transactions. There is also evidence of senior management action to cover up the illegal actions. This was even codified in internal operating manuals. According to BBC News, one was called: "Quality Operating Procedure Iranian Bank Processing", which "provided step-by-step wire stripping instructions for any payment messages containing information that would identify Iranian clients". There are also numerous emails, where the bank's lawyers offer advice on how to circumvent US sanctions laws.
Standard Chartered has stated it is conducting its own review of its historical US sanctions compliance and is discussing that review with US enforcement agencies and regulators. The bank added:
The group cannot predict when this review and these discussions will be completed or what the outcome will be.