Standard Chartered Bank, the UK-headquartered bank that mainly operates in Asia, the Middle East and Africa, on Tuesday rejected the New York state's financial regulator's description of it as a “rogue institution” for allegedly breaching sanctions on Iran, describing any transgressions as “small clerical errors.” However, the banks rejection of the order of New York state’s Department of Financial Services (DFS), which was issued on Monday, failed to convince investors.
StanChart's shares closed down 16.43% to £12.28 in London on Tuesday.
Standard Chartered Bank hid $250bn worth of illegal Iranian transactions; Scheme "apparently aided" by Deloitte & Touche
The bank rejected the regulator’s claim that it had “schemed with the government of Iran” to process “60,000 secret transactions, involving at least $250bn”, in breach of sanctions. In a statement the bank said “99.9%” of the alleged transactions complied with regulations.
“This is an attack,” the Financial Times quoted one senior City figure. “If we don’t stand up to it, it could be catastrophic for London’s financial standing. There has to be some stage where Number 10 or the Treasury says something in defence of the banks.” A second said: “Political intervention may be needed over this.”
The Wall Street Journal asks today: Is something rotten in the City of London?
In the past six weeks, the three big British banks that had survived the financial crisis relatively unscathed have been immersed in scandal - - further soiling the British banking industry's already marred reputation and undercutting the sector's efforts to fend off tougher regulations.
First, in June, Barclays PLC was busted for trying to rig a benchmark interest rate, ultimately claiming the jobs of its chairman and chief executive. Then a US Senate committee attacked HSBC Holdings PLC for allegedly handling money for drug gangs and terrorist groups.
The latest blow came Monday, when New York's bank regulator threatened to revoke Standard Chartered US license for alleged money-laundering violations involving Iran.
The Journal says that things are so bad that before the Standard Chartered news broke, the UK government had launched a public inquiry into banking culture - - even bringing in a bishop to offer a moral perspective.
StanChart said on Tuesday: "The Group does not believe the order issued by the DFS presents a full and accurate picture of the facts. The analysis, that the Group shared with all the US agencies, demonstrates that throughout the period the Group acted to comply, and overwhelmingly did comply, with US sanctions and the regulations relating to U-turn payments. As we have disclosed to the authorities, well over 99.9% of the transactions relating to Iran complied with the U-turn regulations. The total value of transactions which did not follow the U-turn was under $14m.
The Group believes that the interpretation reflected in the DFS’ order, of the U-Turn exemption — a federal regulation administered and enforced by federal authorities — is incorrect as a matter of law. The Group’s review of its Iranian payments also did not identify a single payment on behalf of any party that was designated at the time by the US Government as a terrorist entity or organization.
Standard Chartered ceased all new business with Iranian customers in any currency over five years ago. The Group has made presentations to the DFS and other US agencies concerning the strength of its global sanctions compliance programme during the period under review and through to the present day.
The Group is engaged in ongoing discussions with the relevant US agencies. Resolution of such matters normally proceeds through a co-ordinated approach by such agencies. The Group was therefore surprised to receive the order from the DFS, given that discussions with the agencies were ongoing. We intend to discuss these matters with the DFS and to contest their position."