New York state’s financial watchdog accused Standard Chartered of hiding $250bn of transactions with the Iranian government, leaving “the US financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes”.
The UK-based bank’s shares fell more than 6 per cent after the New York state Department of Financial Services issued an order just before the London market closed, which included a threat to revoke the bank’s licence to operate in the state and called it a “rogue institution”.
Standard Chartered concealed from US authorities about 60,000 transactions for Iranian clients, amounting to about $250bn and generating “hundreds of millions of dollars” in fees for the bank.
Among the Iranian clients were the Central Bank of Iran and two state-owned institutions, Bank Saderat and Bank Melli.
The department, led by Benjamin Lawsky, superintendent of financial services, alleged that Standard Chartered had falsified records and evaded US sanctions. One Standard and Chartered director allegedly told a colleague: “You f---ing Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians?”
In addition to the bank’s “systematic misconduct” with Iran, the Department said it had evidence that Standard Chartered appeared to have conducted “similar schemes” with Libya, Myanmar and Sudan.
Standard Chartered said: “As reported previously, the group is conducting a review of its historical US sanctions compliance and is discussing that review with US enforcement agencies and regulators. The group cannot predict when this review and these discussions will be completed or what the outcome will be.”
Standard Chartered is the second UK bank in two months to face blistering US criticism over allegations of lax controls in moving money. HSBC was last month accused by a US Senate investigation of violating anti-money laundering rules.
In the Standard Chartered case, the bank is accused of “wire stripping”, or removing codes that identify Iranian clients from money transfers.
In a strategy codenamed Project Gazelle, the bank attempted to increase “wallet share” of its relationships with Iranian companies. The regulator said the bank “apparently decided that regulatory compliance would impede any such business expansion”.
In 2004, after concern over its procedures, Standard Chartered was ordered to hire an independent consultant to review its compliance with reporting requirements. Deloitte & Touche was hired.
But the US regulator alleges that the consultant “unlawfully” gave Standard Chartered access to previous reviews it had performed for other banks and ultimately produced what a Deloitte consultant termed a “watered-down version”.
It said Deloitte & Touche “apparently aided” the bank in withholding information from regulators and the consultancy “intentionally omitted critical information in its ‘independent report’ to regulators”.
Deloitte did not immediately respond to a request for comment.
The regulator has instructed the bank to appear at a hearing next Monday to “explain these apparent violations of law and to demonstrate why [its] licence to operate in the State of New York should not be revoked”.
US authorities have been probing the practice of “wire stripping” for several years, with the US Treasury, successive Manhattan district attorneys and the Department of Justice investigating the actions of several banks.