Falklands : Gentlemen’s’ Agreement Averts Standard Chartered Exit from New York
Submitted by Falkland Islands News Network (Juanita Brock) 18.08.2012 (Article Archived on 01.09.2012)
Standard Chartered Bank has agreed to pay $340 Million (£217 Million) to settle sanctions-busting allegations in the US.
‘Gentlemen’s’ Agreement Averts Standard Chartered Exit from New York
An Editorial by J. Brock (FINN)
Standard Chartered Bank has agreed to pay $340 Million (£217 Million) to settle sanctions-busting allegations in the US. The bank has admitted processing $14m of Iranian money through the US, in contravention of strict financial sanctions on the country over the past decade; and the £217 Million deal protects its valuable New York banking licence and averts a public (?) hearing that had been scheduled for Wednesday, 15 August 2012.
The New York state Department of Financial Services (DFS) had accused Standard Chartered Bank of deliberately obscuring the origins of $250 Billion of Iranian money that flowed in and out of its American subsidiary but the nature of the settlement indicates that Standard Chartered Bank’s figure is likely to be significantly more than £14 Million but substantially less than the $250 Billion that DFS claims. However, the value of the business in New York and the ramifications of losing the banking licence were contributing factors in agreeing the payment. It is generally thought that the bank can easily afford the fine.
That practice, the DFS's superintendent, Benjamin Lawsky, claimed, raised doubts about whether Standard Chartered was "fit and proper" to operate in the US but other British Banks have fallen under his scrutiny recently and are still operating in the US. No bank executive has yet to be arrested, let alone tried but such infringements would be prosecuted if it were another business breaking sanctions.
I question background circumstances and whether or not there is posturing and empire building going on. Perhaps Mr Lawsky knows that he could cause a world-wide mess if he is too aggressive in pushing British banks out of New York. Either way, Standard Chartered Bank’s share price has regained losses suffered when the allegations were first announced.
Mr Lawsky announced that the bank has agreed to pay a civil penalty to the state and to install a monitor for at least two years who will evaluate money-laundering risk controls of its New York branch and take corrective measures. State agency's examiners will be placed at the bank.
Standard Chartered Bank's Chief Executive, Peter Sands, flew to New York last week to manage the bank's discussions with the DFS and with other regulators that are also investigating sanctions violations. Those other regulators, including the Department of Justice, have not so far taken as hard a line as Mr Lawsky, which is why the DFS's public threat last week to revoke Standard Chartered Bank’s licence was a left-hook. He had demanded that bank executives appear at a hearing into the matter at 1000hrs on Wednesday, 15 August 2012, though it was never made clear if the hearing would be public or private.
In the end, Standard Chartered Bank decided to pay the £217 Million settlement rather than risk a prolonged showdown as well as the loss of the bank’s lucrative New York licence.
Standard Chartered Bank has rejected Mr Lawsky's accusations as a deliberate misunderstanding of normal bank processes and Standard Chartered had proposed a $5m fine. However, Mr Lawsky said that the bank has now "agreed that the conduct at issue involved transactions of at least $250bn.” Though the framework of the deal has been agreed, the legal wording has not yet been finalised.
Bank analysts want to peruse the small print of any ‘admissions’ by Standard Chartered and the legal arguments used by Mr Lawsky, to see if the precedent changes the balance of power in other negotiations over sanctions and money laundering violations. Standard Chartered said it continued to "engage constructively" with other US agencies, and HSBC is still to wrap up its own talks with an array of US regulators over multiple failures to lock Mexican drug gangs, Iranian sanctions-busters and others out of the US banking system.
For Mr Lawsky, the settlement could be the first lucrative victory for his agency, which was created this year from the merger of the state's previously passive insurance and banking regulators.
Meanwhile, Deloitte, the accounting firm, has been pushing back against allegations from Mr Lawsky that it helped Standard Chartered hide transactions with Iran. The regulator's claims are "distortions of the facts", said Joe Echevarria, Deloitte's chief executive to the Independent.
The DFS cited an email from a Deloitte partner saying he drafted a "watered-down version" of the report after being asked by Standard Chartered to omit information.
"It's an unfortunate choice of words that was pulled out of context," Mr Echevarria told Reuters. "Contrary to the allegation, [Deloitte] "absolutely did not delete any reference to certain types of payments."
Sources: DFS, Reuters, Independent