USA/FILE: Standard Chartered rejects New York bank regulator's claims on Iran dealings

Record ID: 1374290

  • Title: USA/FILE: Standard Chartered rejects New York bank regulator's claims on Iran dealings
  • Date: 7th August 2012
  • Summary: PLEASE NOTE: THIS EDIT CONTAINS CONVERTED 4:3 MATERIAL NEW YORK, NEW YORK, UNITED STATES (AUGUST 7, 2012) (REUTERS) VARIOUS OF LEGAL DOCUMENT AGAINST STANDARD CHARTERED BANK, NEW YORK BRANCH
  • Embargoed: 22nd August 2012 23:07
  • Keywords:
  • Location: Usa
  • Country: USA
  • Topics: Crime
  • Reuters ID: LVA8J5TYK9YDBFF48LFB6NPIJ3K5
  • Aspect Ratio: 4:3
  • Story Text: A New York bank regulator's broadside against Standard Chartered Plc for allegedly hiding $250 billion (USD) in transactions tied to Iran left investors and the bank questioning the motive for the ambush, which wiped $17 billion off its value.
    London-based Standard Chartered hit back at the New York State Department of Financial Services (DFS) threat to tear up its state banking license on Tuesday (August 7), dismissing the charge that it was a "rogue institution" that "schemed" with the Iranian government as a distortion of the facts.
    Bank insiders were as shocked as investors by the ferocity of the DFS accusations over its involvement with Iran, which is subject to U.S. sanctions over its nuclear program.
    Chief Executive Peter Sands scrambled back from his vacation as the bank held hastily convened conference calls to plan its defense and try to limit the damage caused to its reputation.
    The U.S. agency said Standard Chartered hid 60,000 secret transactions to generate hundreds of millions of dollars in fees over nearly 10 years.
    During a news briefing, White House Press Secretary Jay Carney, said, "As you know, sanctions violations are something that this administration takes extremely seriously and has a strong record of action to this end. The Treasury Department remains in close contact with both federal and state authorities on this matter."
    Shares in Standard Chartered closed down 16.4 percent at 12.28 pounds, taking their losses to 24 percent since the news surfaced just before Monday's close. They had earlier slumped as low as 10.92, their lowest for three years.
    A fund manager for a major institutional shareholder in the bank, however, commented that "sensational language" used by the regulator "diminished" its allegations.
    The bank, which has been in talks with U.S. authorities since early 2010 over the matter, had exposed the U.S. banking system to terrorists, drug traffickers and corrupt states, the DFS said.
    The New York regulator described how officials at Standard Chartered, one of the banks least tarnished during the financial crisis thanks to its focus on emerging markets and a conservative approach to capital and liquidity, had debated whether to continue Iranian dealings.
    In October 2006, the top official for business in the Americas, whom the regulator did not name, warned in a "panicked message" that the Iranian dealings could cause "catastrophic reputational damage" and "serious criminal liability".
    A group executive director in London shot back, according to a New York branch officer quoted in a document published by the regulator: "You f---ing Americans. Who are you to tell us, the rest of the world, that we're not going to deal with Iranians."
    The reply showed "obvious contempt for U.S. banking regulations", the regulator said.
    At that time the bank had five executive directors: Peter Sands, now chief executive; Richard Meddings, now finance director; Mervyn Davies, a UK Labour Party peer; Kai Nargolwala, who was poached by Credit Suisse and left the Swiss bank last year; and Mike DeNoma, who resigned as CEO of Chinatrust Financial in August.
    Standard Chartered's Americas CEO was Ray Ferguson, who is now its Singapore CEO.
    None of the people could be reached for comment or else declined to comment.
    Standard Chartered said the bank "does not believe the order issued by the DFS presents a full and accurate picture of the facts".
    The loss of a New York banking license would be a devastating blow for a foreign bank, effectively cutting off direct access to the U.S. bank market. Standard Chartered processes $190 billion every day for global clients, the New York bank regulator said.
    The United States imposed economic sanctions on Iran in 1979, but until November 2008 U.S. banks could process some transactions for Iranian banks or individuals provided they were initiated offshore by non-Iranian foreign banks and were on the way to other non-Iranian foreign banks, known as "U-turns".
    The allegations that a banking unit of Standard Chartered Plc schemed with Iran to conceal billions of dollars in transactions have dragged Deloitte into the spotlight in another hit to the global accounting and consulting firm.
    The New York State Department of Financial Services, in a case involving U.S. anti-money laundering laws, on Monday said Deloitte LLP consultants hid details from regulators about Standard Chartered Bank's transactions with Iranian clients.
    Deloitte said in a statement: "Deloitte Financial Advisory Services performed its role as independent consultant properly and had no knowledge of any alleged misconduct by bank employees. Allegations otherwise are unsupported by the facts."
    The New York Department of Financial Services regulates New York banks and New York branches of foreign banks. It said Standard Chartered's license to operate in the state of New York may be revoked.
    The allegations are the latest in a string of setbacks for the U.S. arm of Deloitte, the world's second-largest accounting and consulting firm.
    Late last year, Deloitte's U.S. arm came under scrutiny from a member of Congress after audit industry regulators unsealed parts of a report criticizing quality controls at Deloitte's corporate auditing business. Deloitte said at the time that it had made investments to improve its audit practice.
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