07 August 2012, Sweetcrude, London – The New York State Department of Financial Services have labelled UK-based Standard Chartered a “rogue institution”, saying the bank laundered as much as $250bn (£161bn) over nearly a decade.
The US Regulator have also ordered the bank to “explain these apparent violations of law” from 2001 to 2010.
The regulator also said that it would hold a formal hearing over the “assessment of monetary penalties”. The bank has also been threatened with having its US banking licence revoked.
However, the bank said the order issued by the US regulator did not present “a full and accurate picture of the facts”.
It said that it had conducted a review of its transactions, primarily those relating to Iran for the period between 2001 to 2007 and had given regular updates to the US authorities on the results of the investigation.
“As we have disclosed to the authorities, well over 99.9% of the transactions relating to Iran complied with U-turn regulations,” the bank said.
“The total value of transactions which did not follow the U-turn was under $14m.”
The so-called U-turns are started outside the US by non-Iranian foreign banks and only pass through the US financial system on the way to other non-Iranian foreign banks.
To ascertain whether these transactions are permitted or not under the current U-turn laws, US clearing banks use the wire-transfer messages they get from the banks involved.
If the banks do not have enough information, they are supposed to freeze the assets.
Penelope Lepeudry, managing director of Kroll Advisory Solutions, a consulting firm specialising in financial investigations, told the BBC that “if the allegations are confirmed, this is a very serious development”.
“The regulators are not going to be merely convinced by a statement from the bank – they need to see the details,” she said.
“The bank will need to open up its books and back the statements with facts.”
Other schemes found
The allegations are far larger than those involving HSBC, which was recently accused by the US Senate of failing to prevent money laundering from countries around the world including Mexico and Iran.
It has set aside $700m to deal with any fines and penalties arising from those allegations.
The regulator said it had also uncovered evidence with respect to what are apparently similar schemes to conduct business with other countries under sanctions – Libya, Burma and Sudan.
“Investigation of these additional matters is ongoing,” it added.
The regulator said that its nine-month probe, which involved looking through more than 30,000 pages of documents, including internal Standard Chartered Bank (SCB) emails, showed that the bank reaped “hundreds of millions of dollars in fees”.
“SCB’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,” it said.
The bank was also accused of falsifying Swift wire payment directions by stripping the message of unwanted data that showed the clients were Iranian, replacing it with false entries.
Senior management were also said to have codified their illegal procedures in formal operating manuals, including one labelled “Quality Operating Procedure Iranian Bank Processing”.
“It provided step-by-step wire stripping instructions for any payment messages containing information that would identify Iranian clients,” the complaint said.
In numerous emails going back as far as 1995, the bank’s lawyers advised on ways to go about circumventing US sanctions.
In March 2001, Standard Chartered’s legal advisor counselled that “our payment instructions [for Iranian clients] should not identify the client or the purpose of the payment”.
By 2006, there were concerns raised about the bank’s conduct in its New York branch.
The chief executive for the Americas sent an email to London saying the programme needs to “evaluate if its returns and strategic benefits are… still commensurate with the potential to cause very serious or even catastrophic reputational damage to the group”.
But those warnings were ignored by senior management in London in what the regulator called a “staggering cover-up”.
Among the violations of the law, the bank is accused of:
*falsifying business records
*failing to maintain accurate books and records
*failing to report misconduct to the regulator in a timely manner
*evading federal sanctions
The US Treasury, which implements the sanctions, said that it treated violations “extremely seriously”.
*This report was culled from the BBC