A day before a hearing in which it faced being kicked out of New York state, British bank Standard Chartered agreed to pay a $340 million fine after admitting to laundering money for Iranian state-owned banks for a decade.
Barely 24 hours before the bank was due to attend a hearing with the New York department of financial services (DFS), the regulator announced the surprise settlement which also includes the installation a monitor for at least two years to evaluate the bank's risk controls. Inspectors from the DFS will be installed at the bank's office in New York and the bank will "permanently install personnel" in New York solely to ensure it adheres to money laundering laws.
Benjamin Lawsky, the head of the DFS, who stunned Standard Chartered last week with damning allegations of sanctions breaches, had summoned the bank to appear at a hearing in New York at 10am local time on Wednesday. But the showdown was adjourned following the settlement, which was announced after the London market had closed.
As part of the deal, Standard Chartered admitted to helping Iranian banks hide $250 million worth of transactions. Sands initially admitted to only $14 million worth of illicit transactions, but blew it off as only a minor violation. That hardly seems believable based on reading
the original bill of particulars filed by DFS, which alleges the bank had deliberately ignored Treasury Department regulations about transactions with Tehran as early as 1995 and continued to do so even when it was being monitored by state regulators from 2004 to 2007. For those who don't recall, the head of the bank's American operations was alarmed enough to alert London about the transactions. In response, one of the bank's board members huffed, "You fucking Americans. Who are you to tell us, the rest of the world, that we're not going to deal with Iranians."
To my mind, the fine isn't enough. Lansky should have made Standard Chartered disgorge the $250 million as well, unless he legally couldn't do so. Even so, the bank isn't out of the woods yet. The FBI and the Treasury Department's Office of Foreign Assets Control are still conducting money laundering investigations of their own. If I were one of Standard Chartered's higher-ups in New York, I'd have a lawyer on speed dial.
The Guardian reports that Standard Chartered CEO Peter Sands could potentially be in the soup for this fraud. He was the bank's finance director from 2002 to 2006--virtually all of the period covered by the scandal. The question here is obvious--what did Sands know, and when did he know it? Apparently the prospect of having to answer that question under oath led Standard Chartered to settle.
Hopefully this won't be the last we'll hear of this.