British Bank gets off too easily and keeps license?
The dreaded moment came when the New York Regulator accused Standard Chartered of illegal transactions of $250 billion. It was then that everyone knew the penalty would be dire, or so they thought...
August 15, 2012 11:46 by Muhammad Aldalou
When Standard Chartered was accused by a New York regulator last week of scheming with Iran, money laundering and allegedly exposing the United States’ financial system, making it vulnerable to weapon dealers or terrorists, everyone held their breath. It was clear that accusations in the banking world don’t get harsher and the violations don’t get any worse. It will grant grounds to the DFS to theoretically demand for an unlimited penalty amount or worse, strip them off their American license, effectively ending their operations.
That was last week. Somehow, the NY Department of Financial Services has now agreed to let them off with a meager penalty and a slap on the wrist. The slap on the wrist being the installation of a monitor at their site for a minimum of two years, reporting directly to DFS and in charge of money laundering evaluation and the meager payment being $350 million.
Considering that they were charged with processing illegal transactions of $250 billion with Iran, despite the bank’s constant refutes that it was nowhere near that amount; then the penalty they were handed is clearly child’s play. As part of the settlement agreements, DFC examiners will also be placed on site. The threats of Benjamin Lawsky, head of the DFS, to strip the bank of its license have clearly vanished in the wind.
An article on Forbes caught my eye as it delved right into the investigation, to get far from beating around the bush and onto the truth with a ‘in a nutshell’ quote by Michael Horn, banking attorney, who said that the department’s decision to not revoke Standard Chartered’s operational license was utterly redundant.
“Standard Chartered got off easy. It should have been banned from doing business in the US. The fine was negligible. Although the monitor is helpful in preventing future non-compliance, what worse violation could there possibly be than what occurred? If you’re not going to revoke a bank charter for engaging in money laundering then why even have power to revoke these licenses in the first place?” he said.
To the surprise of banking lawyers and U.S. based financial analysts, the Regulator said that the ever so influential distinction was made solely on the fact that Standard Chartered, to the knowledge of the DFS, is not still currently engaging in illegal transactions with Iran. It would be a different story if they were, they said.
But now we arrive at the real head-scratcher. After the accusations were filed and announced, Standard Chartered immediately rejected claims of the DFS regarding the amount of illegal transactions recorded. While the Department declared that the laundered transactions amounted to a whopping $250 billion, the bank insisted that the accurate number was close to $14 billion, in which case, a penalty payment of $350 million may have made perfect sense. However, according to the settlement, unanimously agreed upon, by the DFS; both parties confirmed that the amount in question was in fact, $250 billion.
This leads to the conclusion that Lawsky has either furthered the stereotype that regulators are too soft on the banks by stripping them off what’s considered to be loose change or that he was encouraged into drafting a light agreement on them because it would result in a faster settlement. In either case, regulators in the department are not thrilled with his independent decision and while he could be applauded for a quick and efficient resolution, he’s made some enemies down the line.