New York's top bank regulator threatened to strip Standard Chartered Plc of its state banking license, saying the British bank was a "rogue institution" that hid $250 billion in transactions tied to Iran, in violation of U.S. law.
The market value of Standard Chartered Plc had tumbled $16 billion within hours of the announcement.
The New York State Department of Financial Services (DFS) said 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, also exposing the U.S. banking system to terrorists, drug traffickers and corrupt states.
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 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.
In a statement, Standard Chartered said the bank "does not believe the order issued by the DFS presents a full and accurate picture of the facts."
It 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."
The DFS declined further comment. The Representative Office of Iran in Washington was not immediately available to comment. The Treasury Office of Foreign Assets Control, which enforces U.S. economic and trade sanctions against targeted countries, declined to comment.
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 e1.8 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.
In an unusual move, the regulator also found fault with an outside consultant -- Deloitte LLP -- because the firm "apparently aided" the bank in its deception.
A report by Deloitte "intentionally omitted critical information" when submitted to regulators, it said.
Deloitte was hired to conduct a review after Standard Chartered in 2004 was ordered by New York and federal regulators to correct anti-money laundering lapses.
The so-called "look back" review was supposed to identify suspicious transactions between 2002 and 2004. But at one point, Standard Chartered asked Deloitte to "delete" references to certain improper Iranian transactions, according to the New York order.
In a subsequent email, a Deloitte partner said the firm had "agreed" to the request because it was "too politically sensitive for both (Standard Chartered) and Deloitte. That is why I drafted the watered-down version." In 2007, that report enabled Standard Chartered to show regulators it had corrected flaws in its anti-money laundering systems.
In a statement on Monday, Deloitte said its financial advisory service division "performed its role as independent consultant properly and had no knowledge of any alleged misconduct by bank employees. Allegations otherwise are unsupported by the facts."
Lawsky's investigation is extraordinary because probes into how banks carried out transactions tied to Iran primarily have been led by the district attorney's office in Manhattan and the U.S. Justice Department.
His probe is another sign that the regulator intends to join the New York attorney general and Manhattan district attorney in being a top financial watchdog. The DFS was created last October, effectively assuming oversight of two former banking and insurance regulatory agencies that were abolished.
Probes by the Manhattan district attorney and U.S. Justice Department date to 2006 and have targeted some nine banks. Barclays agreed to pay e298 million in 2010 after admitting it processed payments for clients tied to Cuba, Sudan and other countries. Lloyds and Credit Suisse agreed to pay settlements of $350 million and $536 million.
In June, ING agreed to pay e619 million to settle allegations that it, too, violated U.S. sanctions against Cuba, Iran and other countries. It was the biggest fine levied against a bank for sanctions violations.
The Justice Department, working with the FBI in New York, is also investigating Standard Chartered's activities for violations of U.S. sanctions.
Standard Chartered, founded in 1853, is headquartered in London, but specializes in financing in Asia, Africa and the Middle East.
Lawsky said Standard Chartered moved money through its New York branch on behalf of Iranian financial clients, including the Central Bank of Iran and state-owned Bank Saderat and Bank Melli, that were subject to U.S. sanctions.
Monday's order alleged that Standard Chartered removed codes on money transfers and altered message fields, inserting phrases such as "NO NAME GIVEN" to hide the nature of the transactions.
At the center of concern were alleged "U-Turn" transactions, involving money moved for Iranian clients among banks in Britain and the Middle East and cleared through Standard Chartered's New York branch, but which neither started nor ended in Iran.
Such transactions were permissible until November 2008, when the Treasury Department prohibited them on concerns that they were being used to evade sanctions, and that Iran was using banks to fund nuclear and missile development programs.
The New York order also alleged that even as some banks exited the U-Turn transactions, Standard Chartered hustled to "take the abandoned market share." In a December 2006 memo titled, "Project Gazelle, Report on Iranian Business," bankers discussed how to increase "wallet share" with Iranian clients.
Standard Chartered's stock fell 8 percent in the final 15 minutes of trading in London amid reports of the U.S. probe. Standard Chartered shares closed down 6.2 percent at 14.70 pounds ($22.91). The market value of Standard Chartered Plc had tumbled $15 billion by early Tuesday.
Chairman John Peace, CEO Peter Sands and Finance Director Richard Meddings could not be reached for comment, and the bank declined to comment beyond its brief statement.
[URL="http://www.haaretz.com/news/israel-s-eye-on-iran/latest-news-on-iran/rogue-british-bank-may-lose-n-y-ties-after-hiding-iran-dealings-1.456556"]http://www.haaretz.com/news/israel-s-eye-on-iran/latest-news-on-iran/rogue-british-bank-may-lose-n-y-ties-after-hiding-iran-dealings-1.456556

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British bank accused of scheming with Iran to launder billions

A currency exchange bureau worker counts US dollars, as Iranian bank notes are seen at right with portrait of late revolutionary founder Ayatollah Khomeini, in downtown Tehran, Iran, Wednesday, Dec. 21, 2011. (AP / Vahid Salemi)

The Associated Press
Published Tuesday, Aug. 7, 2012 6:36AM EDT

ALBANY, N.Y. -- A British bank schemed with the Iranian government to launder $250 billion from 2001 to 2007, leaving the United States' financial system "vulnerable to terrorists," New York's financial regulator charged Monday.
In a statement released Monday night, Standard Chartered Bank said it "strongly rejects" and "contests" the New York regulators' portrayal of its transactions with Iranian banks. It said it voluntarily began reviewing the transactions since 2010 with U.S. regulators and the findings don't match the accusations levelled at the bank Monday.
State Financial Services Supt. Benjamin Lawsky signed an order that requires London-based Standard Chartered Bank to answer his questions following an investigation into "wire stripping," the practice of removing crucial identifiers in financial transactions.
The state agency called the bank a rogue institution and quoted one of its executives as saying: "You (expletive) Americans. Who are you to tell us, the rest of the world, that we're not going to deal with Iranians."
The bank conspired with its Iranian clients to route nearly 60,000 different U.S. dollar payments through Standard Chartered's New York branch "after first stripping information from wire transfer messages used to identify sanctioned countries, individuals and entities," according to agency's order.
The order said the transactions provided the bank with millions of dollars in fees at a time when such trade was restricted.
"The group does not believe the order issued by the DFS presents a full and accurate picture of the facts," the bank said Monday night in a fuller response to Lawsky's order. "The analysis, that the group shared with all the U.S. agencies, demonstrates that throughout the period the group acted to comply, and overwhelmingly did comply, with U.S. sanctions and the regulations."
The statement said "well over 99.9 per cent" of the questioned transactions with Iran complied with all regulations. The few transactions that didn't amounted to just $14 million, according to the bank. The bank said none of its Iranian payments was on behalf of any designated terrorist group.
"The group takes its responsibilities very seriously, and seeks to comply at all times with the relevant laws and regulations," the bank stated. "It is in this spirit we initiated this review and have engaged with the U.S. agencies."
The bank also said it had no prior notice of the order.
A government official said Monday that the FBI's New York office has been investigating the matter to determine if criminal charges should be brought. The official wasn't authorized to discuss the probe and spoke to The Associated Press on condition of anonymity.
An FBI spokesman declined to comment.
The state agency said the bank's actions "left the U.S. 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 bank stripped information from the money transfers that is used to identify countries being sanctioned and replaced it with false entries or returned it to Iran for "wire stripping" and resubmission, according to the order.
The bank "developed various ploys that were all designed to generate a new payment message for the New York branch that was devoid of any reference to Iranian clients," according to the order.
The order also identifies an October 2006 "panicked message" from a London group executive director who worried the transactions could lead to "very serious or even catastrophic reputational damage to the group."
If proven, the scheme would violate state money-laundering laws. The order also accuses the bank of falsifying business records, obstructing governmental administration, failing to report misconduct to the state quickly, evading federal sanctions and other illegal acts.
Between 2004 and 2007, about half the period covered by the order, the department claims Standard Chartered hid from and lied about its Iranian transactions to the Federal Reserve Bank of New York. Before 2008, banks were allowed to transact some business with Iran, but only with full reporting and disclosure, the order states.
In 2008, the U.S. Treasury Department stopped those transactions because it suspected they helped pay for Iran to develop nuclear weapons and finance terrorist groups including Hamas and Hezbollah. The order states the bank has to provide information and answer to its questions to determine if any of its funding aided the groups or Iran's nuclear program.
The order said the bank operates in 70 markets as a leading international banker with clients who are among the largest corporations and financial institutions in the world. The order notes the bank states in its own documents that its success is because of its "moral compass" and a core value of "openness" that is based on "always trying to do the right thing."
It handles about $190 billion per day in business for its clients, according to the order.

Read more: http://www.ctvnews.ca/business/british-bank-accused-of-scheming-with-iran-to-launder-billions-1.905848#ixzz22rXszIDN

Quote:Standard Chartered: rogue bank or victim of renegade regulator?

Only one side can win in the fight between the bank and New York's state department of financial services over Iran allegations

Nils Pratley
guardian.co.uk, Tuesday 7 August 2012 19.20 BST




Which is it? Is Standard Chartered a "rogue institution", as the New York state department of financial services alleges? Or is the new US body a rogue regulator led by a lawyer, Benjamin Lawsky, seeking to make his name in the style of Eliot Spitzer, one-time scourge of Wall Street before his downfall?

It has to be one or the other because the positions of the two sides are miles apart. The New York DFS alleges that Standard Chartered hid $250bn (£160bn) of transactions with the Iranian government by falsifying records.

The bank maintains Lawsky is talking rubbish. It says 99.9% of the transactions disclosed to regulators complied with the rules and that the infringements involve the relatively modest sum of $14m.

Further, Standard Chartered asserts that the DFS's interpretation "is incorrect as a matter of law".

An honourable draw isn't possible here. Consider the tussle as a head-to-head confrontation in the Olympic velodrome: somebody will win, somebody will be eliminated.

The stock market's reaction was to knock 20% off Standard Chartered's share price. That's not investors prejudging the facts. They are just reflecting the possibility that, in a single blow, the bank could lose its reputation, a chunk of its senior management and its licence to process dollars in New York. The risk of a triple whammy may still be remote but it has to be priced.

Standard Chartered, don't forget, is an institution that likes to think of itself as a cut above the rest. The reason it hasn't got into scrapes, management likes to proclaim loudly and often, is because it conducts itself properly.

Consider this self-congratulatory statement by the chairman, Sir John Pease, only last week: "In recent weeks, issues have surfaced around governance and behaviour in banking. At Standard Chartered, we believe it is not just about what we do, but how we do it. Our culture and values continue to be a source of strength and a competitive advantage. Strong corporate governance and an obsession with the basics of banking remain key areas of focus for our board."

Pease, we must assume, would not have chosen to sound so puffed up if he had known that Lawsky was about to publish his explosive allegations. The timing is an unusual aspect of this tale. Scandals in banking-land or, rather, their revelation, tend to be choreographed when regulators become involved. The existence of an investigation is often known (and it was at Standard Chartered) but the details of the wrong-doing, the admission of fault and the nature of the punishment tend to be published simultaneously.

That's how the plot worked with Barclays and Libor-rigging the Financial Services Authority issued its final notice, imposed a £290m fine and the directors made a grovelling apology. Similarly, HSBC said sorry immediately when a US senate committee said the bank's lax systems had allowed drug cartels to launder money.

In the Standard Chartered case, the choreography has collapsed. The bank complains that it was in discussions with five US agencies, including the US department of justice, and was surprised to receive the New York DFS's order. It grumbles that "resolution of such matters normally proceeds through a co-ordinated approach by such agencies".

Fair point. So why did the DFS go public? It's not clear. Is Lawsky, who has argued that regulators do too much in secret, trying to maximise his profile and that of his 10-month-old department? Or was Standard Chartered deemed not to be co-operating with the investigation?

Of more concern to Standard Chartered shareholders will be the size of the transactions involved: $250bn. The bank's two-sentence summary of the investigation in its recent results statement gave no hint that the affair could be that big or that regulators might seek to revoke the licence to operate in New York. Now they know. If the chief executive, Peter Sands, is to survive in his post, he needs to be vindicated in full.

Mind you, Lord Davies, the lauded former chief executive and then chairman during the period under scrutiny, would also be dragged into the affair if Standard Chartered ends up paying a fine that investors might regard as tolerable say, the $600m at which Dutch bank ING settled similar allegations.

Such sums don't ruin profit and loss accounts at banks as successful as Standard Chartered but they do undermine reputations.

Magda Hassan Wrote: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."

Mark Stapleton Wrote:

Magda Hassan Wrote: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."

My sentiments exactly.

How dare the US prohibit the world from dealing with Iran, just to satisfy Zionist hatred.

Compared to the US and Israel, the Iranian Government is a model global citizen. And the impact of sanctions and financial banishment is borne by millions of innocent Iranians.

Magda Hassan Wrote:

Mark Stapleton Wrote:

Magda Hassan Wrote: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."

My sentiments exactly.

How dare the US prohibit the world from dealing with Iran, just to satisfy Zionist hatred.

Compared to the US and Israel, the Iranian Government is a model global citizen. And the impact of sanctions and financial banishment is borne by millions of innocent Iranians.

Try sending money to Cuba and it not getting confiscated by the US banking system. Even if you use an Australian bank direct to Cuba.

Mark Stapleton Wrote:

Magda Hassan Wrote:

Mark Stapleton Wrote:

Magda Hassan Wrote: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."

My sentiments exactly.

How dare the US prohibit the world from dealing with Iran, just to satisfy Zionist hatred.

Compared to the US and Israel, the Iranian Government is a model global citizen. And the impact of sanctions and financial banishment is borne by millions of innocent Iranians.

Try sending money to Cuba and it not getting confiscated by the US banking system. Even if you use an Australian bank direct to Cuba.

So?

Are you implying Zionist sanctions and isolation of Iran are OK?

What did Iran do to deserve this?

Magda Hassan Wrote:There should be sanctions against the US.