Standard Chartered Bank is the third British bank to be ensnared in U.S. law-enforcement probes this summer. Barclays Bank agreed to pay $453 million to settle U.S. and UK probes that it rigged a global benchmark in June. A month later after the rate-rigging Libor scandal, a U.S. Senate panel issued a scathing report that criticized HSBC Holdings Plc’s efforts to police suspect transactions, including Mexican drug traffickers. Four banks — Barclays Bank, Lloyds Banking Group, Credit Suisse Bank and ING Bank NV — have agreed to fines and settlements totaling $1.8 billion. HSBC Holdings Plc currently is under investigation by U.S. law enforcement, according to bank regulatory filings.
Standard Chartered Bank, founded in 1853, is headquartered in London, but it specializes in financing in Asia, Africa and the Middle East. Never seen before, a New York’s top bank regulator threatened in an order warning that Standard Chartered Bank’s U.S. unit may be suspended from doing business in the state, saying it was a “rogue institution” that hid $250 billion in transactions tied to Iran, in violation of U.S. law. The New York State Department of Financial Services (DFS) on Monday said the British bank “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. Standard Chartered Bank fell as much as 14% in London trading and was down 13% at 1,273 pence as of 8:06 a.m. today, heading for the biggest decline in almost four years.
Standard Chartered Bank is big target for DFS:
The state’s Department of Financial Services, which combined its banking and insurance departments, was formed in October. Benjamin Lawsky, New York Governor Andrew Cuomo’s chief of staff, was nominated by his boss & heads the agency created only 10 months ago to crack down on financial malfeasance. Since then, Lawsky has targeted predatory foreclosure practices and probed lenders on whether they overcharged homeowners for insurance. On Monday, he scored his biggest headlines yet, accusing Standard Chartered of flouting U.S. sanctions and hiding $250 billion in Iranian transactions from U.S. authorities.
Standard Chartered Bank earned hundreds of millions of dollars in fees for handling transactions on behalf of Iranian institutions that are subject to US economic sanctions, New York’s Department of Financial Services said yesterday. The London-based bank, which generates almost 90% of its profit and revenue in Asia, Africa and the Middle East, was ordered by the regulator to hire an independent, on-site monitor to oversee operations in the state. At the same time, it exposed the U.S.banking system to terrorists, drug traffickers and corrupt states, the department said.
Standard Chartered Bank processes $190 billion every day for global clients, the New York bank regulator said, & 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 Bank’s U.S. headquarters are in New York, so a revocation of its license would have potentially major implications on its ability to conduct business in the U.S. Similarly, its U.S. dollar clearing operations, the seventh-largest in the world, according to Standard Chartered Bank, would potentially impact its core business trade finance business model. The scandal may cost the bank as much as $5.5 billion in fines, lost revenue and reduction in share price.
When the head of the bank’s U.S. unit warned his superiors in London in 2006 that Standard Chartered Bank’s actions could expose it to “catastrophic reputational damage, and “serious criminal liability,” he received a reply referring to U.S. employees with an obscenity, according to the order. 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” reports Reuters. The reply showed “obvious contempt for U.S. banking regulations,” the regulator said. 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.”
The Iranian Embassy 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.
Probes by the Manhattan district attorney and U.S. Justice Department date to 2006 and have targeted some nine banks. Britain’s Barclays agreed to pay $298 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 $619 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. Lawsky said Standard Chartered Bank 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.
Standard Chartered Bank’s New York operation had $40.8 billion of assets at the end of March, according to the New York regulator. By comparison, the bank had $624 billion in assets at the end of June, said Bloomberg.
As Given in Forecast 2012 – There will be corruption and the rooting out of corruption. Industry barons will do all within their power to maintain their advantages at this time through strong links to government. The awareness of the suffering of the underprivileged has scarcely begun. What we will see over the next few years is the extreme polarization of right-wing solutions. Finally by 2024, there will be little that remains of the autocratic structures that are currently being put in place to safeguard the Banks and corporations whose survival is currently threatened. Read more…as posted on Jan 18 – 2012.
Regulation issues, scandals and a protracted slow-growth economy seem to have finally caught up with big Banks. Read More…