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August 07, 2012 at 05:38 AM
Another British bank, termed a “rogue institution,” is in the crosshairs of the New York Department of Financial Services, which has warned bank that it could be suspended from doing business in the state over charges that it violated money-laundering laws in dealings with institutions in Iran that are subject to U.S. economic sanctions.
Bloomberg reported Tuesday that Standard Chartered, a London-based bank with U.S. operations headquartered in New York, was warned in 2006 by its U.S. head that the bank’s actions could expose it to “catastrophic reputational damage.” However, the reply he received from a superior in London categorized U.S. employees with an obscenity, according to the order issued by the regulator.
The order quoted that reply saying in part, “Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians?” According to the regulator, the bank conducted $250 billion in transactions with Iranian banks in seven years, violating federal laws against money-laundering.
Nearly 90% of Standard Chartered’s profit and revenue comes from Asia, Africa and the Middle East.
In a statement, the bank said that 99.9% of its Iran transactions were in compliance with U.S. Treasury regulations, and that the total value of transactions that failed to comply totaled less than $14 million. It also said it “strongly rejects the position and portrayal of facts” made by the state regulator, run by Superintendent Benjamin Lawsky.
Standard Chartered is far from the first London-based bank to be hit with charges for violating money-laundering laws. Barclays, a unit of Lloyds and HSBC just last month were accused of proscribed transactions.
“It really seems as if they are perfectly prepared to flout whatever sanctions, rules and laws anybody tries to impose on them,” said Sherrill Shaffer in the report. Shaffer, formerly a senior economist for the New York Fed and now a banking professor at the University of Wyoming in Laramie, added, “It starts to convey a picture that London-based banks have decided that they’re not going to pay attention to U.S. sanctions with regard to their U.S. operations.”
Should Standard Chartered lose its New York banking license, Royal Bank of Canada analysts said it would take a heavy toll on the bank’s ability to process dollar payments. Patrick Lee, an RBC analyst in London, said in the report, “These are very serious penalties. Standard Chartered’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.”
