Even as London-based Standard Chartered fought back against an order from New York’s top regulator, Benjamin Lawsky, experts in the U.S. and abroad say that the bank’s internal e-mails give Lawsky a basis for his unilateral action against the bank. The two sides will have a hearing Wednesday.
Bloomberg reported that an order issued Monday by Lawsky’s agency, the New York State Department of Financial Services (DFS), which threatened to revoke the bank’s license, cited e-mails that appeared to indicate a pattern of deception and disregard for anti-money-laundering laws. The bank has gone on the offensive against Lawsky, complaining about the fact that he acted independently instead of in concert with other U.S. agencies currently investigating the bank. It also challenges the amount of money involved in the questionable transactions.
While Standard Chartered is making its loudest arguments over Lawsky’s action by disputing the dollar figure Lawsky cited as violating regulations—the bank says the amount is less than $14 million, while Lawsky puts the figure at $250 billion—the fact that there was an apparent coverup of any of it puts the bank’s license in jeopardy.
The DFS charter gives Lawsky the power to act on his discretion against any financial institution he finds to be untrustworthy. That includes levying fines, and even revoking the bank’s license to operate in New York—something that could deal a telling blow to its business in the international community.
According to the analyst Chirantan Barua at Sanford Bernstein Research in London, losing its New York license could cause the bank’s earnings to drop 40% and cause significant damage to its corporate banking model.
Arthur Levitt, former chairman of the SEC, was quoted saying in an interview, “I don’t care whether it is a half of 1% that weren’t right. There are going to be more that weren’t right.” Levitt added, “The e-mails are really outrageous. I think Lawsky has uncovered something that probably has a much deeper depth.”
Levitt isn’t the only one to feel that Lawsky stands on firm ground. Owen Watkins, a partner with the London law firm Lewis Silkin, said in the report, “Making and publicizing the order was within the power conferred on Mr. Lawsky by section 39 of the New York Banking Law. On the basis of the order, you can see that the superintendent has an arguable case, with the e-mails and the comments made by certain Standard Chartered staff internally.”