Standard Chartered’s Iranian links spark ‘rogue institution’ attack

Standard Chartered’s $340m (£216m, €272m) settlement of allegations of sanctions busting, brought by Benjamin Lawsky, superintendent of New York’s Department for Financial Services (DFS), has been welcomed by investors.

 

But analysts have warned that the London-based bank still faces investigations by four other US regulators, which have been probing breaches of rules on banking transactions with Iran, that may result in further large payouts.

 

Lawsky is holding on to “evidence with respect to what are apparently similar Standard Chartered Bank schemes to conduct business with other US sanctioned countries, such as Libya, Burma and Sudan”.

 

By agreeing the deal with Lawsky, the ambitious DFS head, chief executive Peter Sands, has avoided what could have been a damaging public hearing over the highly-charged allegations that Standard Chartered had acted like a ‘rogue institution’.

 

Pressure on the chief executive and his senior colleagues has been considerably reduced, although it could take time to repair the bank’s reputation. Sands told staff that they had reached the settlement “in the best interests of shareholders, clients, customers and staff”.

 

Lawsky originally claimed that Standard Chartered hid “60,000 secret transactions involving at least $250bn”, releasing the information in a statement before any court had a chance to weigh the case. 

 

With Lawsky’s attack on Standard Chartered, its share value began dropping. In one morning’s trading, accusations in a press release and uncontested legal charges, the bank’s shares lost $16bn after the unproven allegations that US sanctions on Iran were violated hit the press.

 

The Bank of England governor portrayed Lawsky as marching to his own tune, and out of step with federal regulators in Washington. “One regulator, but not the others, has gone public while the investigation is still going on,”  Mervyn King said at a news conference in London.”

 

After the settlement was reached, Lawsky revised his position regarding the extent of the bank’s wrongdoing.

 

It is agreed now that only $300m worth of transactions in the past decade were illegal. Standard Chartered had been claiming that only $14m worth of deals broke the rules. Sands apologised for the discrepancy: “This was clearly wrong and we are sorry that they happened.”

 

Sources suggest that regulators inspected 1.5 million transactions and found just 300 that broke the sanctions rules. Standard Chartered’s New York branch handles roughly $200bn worth of dollar transactions for its worldwide clients every day.

 

“Standard Chartered has probably done the right thing,” said Hugh Young, Asia managing director at Aberdeen Asset Management, Standard Chartered’s third-biggest shareholder. “You just pay up and get on with life, however innocent you feel you are.”

 

Not mentioned in the first stories was that Standard Chartered had met Lawsky’s office months earlier, but nothing was said then about any misdemeanours.

 

But Ian Gordon, banking analyst at Investec, has questioned the regulator’s actions. He said: “It is highly unsatisfactory that the DFS allegations have effectively allowed a false market to develop in Standard Chartered’s shares.”