StanChart licence may be cancelled

In a 27-page order,the Superintendent of Financial Services Benjamin Lawsky of DFS said that “grounds exist for revocation of Standard Chartered Bank’s licence to operate in the State of New York and that interim measures must be taken to protect the public interest.”

The order accused Standard Chartered of operating as a “rogue institution” which was “motivated by greed.”

The bank “acted for at least 10 years without any regard for the legal,reputational,and national security consequences of its flagrantly deceptive actions.

“Led by its most senior management,SCB designed and implemented an elaborate scheme by which to use its New York branch as a front for prohibited dealings with Iran – dealings that indisputably helped sustain a global threat to peace and stability,” the DFS order said.

Reacting to the regulator’s order,Standard Chartered said it “strongly rejects” the position and portrayal of facts made by DFS.

The bank said that over 99.9 per cent of its Iran-related business was in compliance with the relevant regulations and total value of transactions in non-compliance was less than USD 14 million,and the bank stopped all its new businesses with Iranian clients over five years ago.

Iran figures among the countries barred by the US for doing any business by individuals and business entities.

StanChart has been ordered to appear before the Superintendent on August 15 to explain its violations of law and demonstrate as to why its licence to operate in the State of New York should not be revoked.

It has also been asked to explain as to why its US dollar clearing operations should not be suspended pending a formal licence revocation hearing.

“For almost ten years,SCB schemed with the Government of Iran and hid from regulators roughly 60,000 secret transactions,involving at least USD 250 billion,and reaping SCB hundreds of millions of dollars in fees,” the order said.

It added,”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.”

SCB engaged in “deceptive and fraudulent misconduct” for nearly a decade in order to move at least 250 billion dollars through its New York branch on behalf of its Iranian clients that were subject to US economic sanctions.

In its “evident zeal” to make hundreds of millions of dollars at “any cost”,SCB falsified business records,offered false instruments for filing,failed to maintain accurate books and records of transactions and evaded US sanctions.

The regulator said any banking institution that engages in such conduct is “unsafe and unsound”.

The bank,which has significant presence across the world,has also been found to have deficient money laundering controls in its outsourcing of work to India,the DFS said after “extensive investigations” of thousands of documents.

The bank said it is conducting a review of its historical compliance and is discussing that review with US agencies,including the DFS,the Department of Justice,the Office of Foreign Assets Control and the Federal Reserve.

‘Stanchart in $250-bn secret Iran deals’

New York state today accused global banking giant Standard Chartered of hiding about 60,000 secret transactions with the Iranian government,involving a whopping USD 250 billion,and exposing the US financial system to terrorists,weapon dealers and drug kingpins.

The UK-based bank,which has significant presence across the world,has also been found to have deficient money laundering controls in its outsourcing of work to India,found a probe by New York State Department of Financial Services.

“For almost ten years,SCB (Standard Chartered Bank) schemed with the Government of Iran and hid from regulators roughly 60,000 secret transactions,involving at least USD 250 billion,and reaping SCB hundreds of millions of dollars in fees,” the New York state department said in a 27-page order.

“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,” it added.

The order further said SCB had assured the Department in May 2010 that it would take immediate corrective actions on issues previously raised by the US Office of Foreign Assets Control (OFAC).

Notwithstanding that promise,the state department’s last regulatory examination of the banks’ New York branch in 2011 identified continuing and significant BSA/AML (Banking Secrecy Act/Anti Money Laundering) failures.

Among these,the bank was outsourcing its “entire OFAC compliance process for the New York branch to Chennai,India,with no evidence of any oversight or communication between the Chennai and the New York offices.”

Part of the US Department of Treasury,the OFAC is the designated government agency for preparing list of entities with whom US citizens and entities are barred from doing any business.

The other failures included an OFAC compliance system that lacked the ability to identify misspellings and variations of names on the OFAC sanctioned list.

Also,there was no documented evidence of investigation before release of funds for transactions with parties whose names matched the OFAC-sanctioned list.

The order against Stanchart by New York state comes close on the heel of the US Senate’s Permanent Committee on Investigations report on July 17 charging another UK-based global bank HSBC of exposing the US financial system to terrorist financing and money laundering risks.

In that probe also,HSBC’s staff in India had come under the scanner for deficiencies in their role as “offshore reviewers” of the global banking giant’s compliance to safety mechanism against money laundering and terrorist financing.

The Senate sub-committee probe found that HSBC’s Anti-Money Laundering (AML) Compliance Department,which included employees in India,was highly inadequately staffed and deficiencies were found in the quality of the work done by HSBC’s “offshore reviewers in India”,who were used for clearing a major backlog of suspected transaction alerts at the bank.

The New York State Financial Services Department said its order against Stanchart follows an “extensive investigation (that) included the review of more than 30,000 pages of documents,including internal SCB e-mails that describe willful and egregious violations of law.”

The New York Department said that its initial focus was on SCB’s apparent systematic misconduct on behalf of Iranian clients. However,its review uncovered evidence with respect to what are apparently similar SCB schemes to conduct business with other US sanctioned countries,such as Libya,Myanmar and Sudan.

Investigation of these additional matters is ongoing,it added.

In its order,the State has directed SCB to appear and explain apparent violations of law,demonstrate why its licence to operate in New York should not be revoked,and “pay for an independent,on-premises monitor of the Department’s selection to ensure compliance with rules governing the international transfer of funds”.

The order said for nearly a decade,SCB “programmatically engaged in deceptive and fraudulent misconduct in order to move at least USD 250 billion through its New York branch on behalf of Iranian clients that were subject to US economic sanctions,and then covered up its transgressions.

These clients included Central Bank of Iran/Markazi,as well as Bank Saderat and Bank Melli,both of which are Iranian State-owned institutions.

The order said that “in its evident zeal to make hundreds of millions of dollars at almost any cost”,SCB falsified business records,failed to maintain accurate books and records,obstructed governmental administration,failed to report misconduct to the Department in a timely manner and evaded Federal sanctions,among other violations.

From January 2001 through 2007,SCB conspired with its Iranian Clients to route nearly 60,000 different US dollar payments through SCB’s New York branch after first stripping information from wire transfer messages used to identify sanctioned countries,individuals and entities.