Standard Chartered joins the ranks of the ‘rogue and disgraced’
Barclays, Credit Suisse Group, ING and Lloyds have settled their fines after conclusive investigations but it did not end there for foreign banks. Standard Chartered could have its state license stripped by U.S. regulators for hiding illegal dealings with Iran
August 7, 2012 9:39 by M. Aldalou
Among the several revealed financial probes, led by U.S. federal law officials and investigating the compliance of foreign banks and financial institutions, Standard Chartered found itself to be the sixth foreign bank to be probed for the discrete continuity of dealings with sanctioned countries like Iran.
In fact, the 150-year-old British bank has received serious threats from the New York’s top bank regulator with consequences of not merely dolling out large sums of cash as a penalty but the potential loss of its state-banking license; effectively eliminating them from industry access. Some analysts have described it as a rare move on the regulator’s part, considering that other foreign banks faced only hefty fines.
Furthermore, the regulator described Standard Chartered as a “rogue institution” for hiding $250 billion worth of Iranian-tied transactions, which in a nutshell, is a violation of U.S. law. There were over 60,000 financial transactions hidden under the table and far from the regulator’s eyes, allegedly of course.
The lash comes as no surprise but rather another expected domino to have fallen. Barclays, Lloyds, Credit Suisse Group and ING bank have all agreed to shell out fines and settlements, after their probes were concluded, totaling to a whopping $1.8 billion. And according to bank regulatory filings, HSBC is also facing current investigations.
The reaction of British officials is, and has been since 2006, full of “contempt towards the U.S. style of procedures and its banking regulations”, according to the New York regulator. When a London official heard of a statement from America’s bank regulator in 2006, warning banks and institutions that Iranian dealings could cause “catastrophic reputational damage”, his response was less than subtle.
“You ‘effing’ Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians?”
Still, there is no denying that if Standard Chartered were to lose its license that it would prove to be a huge trading blow; subsequently cutting off direct access to such a large market of financial potential. But, they have been accused of scheming with the Iranian government while generating hundreds of millions of dollars; all the while painting the U.S. a negative colour so the hopes of evasion aren’t resting very high.
If they do have their state-operating license stripped, the lost numbers will be too large to fathom. The New York bank regulator says that Standard Chartered process $190 billion every day for global clients. Paul Cavanagh, a London Stockbroker fears that if the Iran allegations are proved, then the U.S. will certainly stretch out the limits of the fine.
“What we do know about the US is that if there is a fine to be imposed – and certainly if it’s been using the US operation to transfer money from the Iranian government through the US system – then I’m guessing that that fine could be pretty much unlimited,” he said.
On the other side of the spectrum, hope arises as, Benjamin Lawsky, heading the New York regulator, may be playing the ‘good-cop, bad-cop’ routine while granting the British bank ‘the chance’ to explain to him why they should be allowed to keep their license and continue their American operations.
“Standard Chartered Bank has operated as a rogue institution,” Lawsky said in the order. “The bank’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.”
He went on to explain, in a theoretical light, that the ‘alleged’ hidden transactions were done by the removal of codes on the money transfers and altered fields. Describing it as the “U-Turn” transactions, Lawsky says that the banking giant funneled money through its NY branch on the behalf of Iranian clients; involving the transfer of money among banks in Britain and the Middle East. The clever reflection of the scheme is that said transactions neither started nor ended in Iran; a clever rouse that may have cleared prior to 2008, before the Treasury Department banned such transactions.