Not two months since Britain’s fourth biggest bank, Barclays, was found to have manipulated Libor rates, new revelations of a money laundering scandal involving the U.K.’s fifth biggest bank, Standard Chartered, have now come to light. On August 6, the New York Department of Financial Services (DFS) accused Standard Chartered of hiding $250 billion worth of Iranian transactions through its U.S. operations, in direct violation of U.S. sanctions, over the last 10 years. The U.K. Financial Services Authority (FSA) proceeded to label the British bank as a “rouge institution” and that the transactions could have aided the funding of terrorism.
Standard Chartered formed in 1969 from mergers of two former British imperial age banks – the Chartered Bank of India, Australia, and China (1853), and the Standard Bank of British South Africa (1863). It is the world’s 46th largest bank by assets. Despite being headquartered in London, 90% of the bank's business comes from Asia, Africa, and the Middle East, and operates no branches in the UK. It is also one of the two main financial institutions in the financial hub of Hong Kong (the other being HSBC) that is responsible for the issue of Hong Kong dollars.
In the wake of the allegations, Standard Chartered saw its share price drop by 9%, wiping some $6 billion from its books. Additionally, U.S. regulators also began their own separate probes into the bank’s activities, including the Treasury Department, Federal Reserve and the Department of Justice, and the Manhattan District Attorney’s office. Whilst both U.S. and U.K. officials were preparing for a prolonged battle, it was announced on August 14 by Benjamin Lawsky of New York DFS that Standard Chartered had agreed to a deal to resolve the scandal and prevent the bank from losing its important New York banking license.
The deal sees Standard Chartered agree to pay DFS $340 million, in order to avoid losing their license as well as prosecution. Furthermore, Standard Chartered is required to employ transaction auditors in their U.S. branch and to install a monitor from DFS for a period of two years to oversee all international transactions. Response to this speedy settlement has been positive with the bank’s share price improving by 3% and unlike the Barclays’ scandal, it is unlikely any major heads will role. A statement issued by the bank gave no indication as to an explanation for the transactions but merely stated that DFS’s accusations were “excessively exaggerated,” it rejects the portrayal presented by DFS, that no new Iranian client work has been undertaken since the enactment of sanction and that it simply wants to move on from this. However sources claim that chief executive Peter Sands responded to the initial accusation from DFS with “You fucking Americans! Who are you to tell us, the rest of the world that we are not going to deal with Iranians?” underscoring that things are not entirely as amicable as the bank’s PR machine would have people believe.
Investigations by the other four U.S. regulators still continue, and Standard Chartered hopes that their willingness to cooperate and resolve matters quickly will result in the four bodies merging their probes and claims into one.