Standard Chartered shares plunge on laundering charges


Standard Chartered "has to open its books to show us what really happened," says Kroll's Penelope Lepeudry

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Shares of Standard Chartered have tumbled despite the bank denying allegations that it illegally "schemed" with Iran to launder money.

Shares in London fell 16.7%, about as much as its Hong Kong stock dropped.

The New York State Department of Financial Services said the UK-based bank laundered as much as $250bn (£161bn) over nearly a decade.

It said the bank hid transactions for "Iranian financial institutions" that were subject to US economic sanctions.

The regulator said that Standard Chartered had hidden 60,000 such secret transactions.

However, the bank denied the allegations, saying that it "strongly rejects the position or portrayal of facts as set out in the order" issued by the regulator.

'Not a full picture'

Standard Chartered

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The US regulator labelled UK-based Standard Chartered a "rogue institution" and ordered the bank to "explain these apparent violations of law" from 2001 to 2010.

It accused Standard Chartered of falsifying payment directions by stripping the message of unwanted data that showed the clients were Iranian, replacing it with false entries.

"It provided step-by-step, wire-stripping instructions for any payment messages containing information that would identify Iranian clients," the complaint said.

The regulator also said that it would hold a formal hearing over the "assessment of monetary penalties". The bank, which currently only operates in the US in New York, has also been threatened with having its New York banking licence revoked.

The regulator also pointed the finger at consultancy firm Deloitte, suggesting it could have aided Standard Chartered in its alleged deception.

Deloitte had "intentionally omitted critical information" in a report, it said.

Deloitte responded by saying its financial advisory service division "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."

Account freeze

U-turns and Wire strips

  • Wire-stripping: Removing key information from electronic financial transactions
  • U-turn transactions: A transfer of funds from one foreign bank to another, via a US financial institution.

Standard Chartered also said the order issued by the US regulator did not present "a full and accurate picture of the facts".

It said that it had conducted a review of its transactions, primarily those relating to Iran for the period between 2001 to 2007, and had given regular updates to the US authorities on the results of the investigation.

"As we have disclosed to the authorities, well over 99.9% of the transactions relating to Iran complied with U-turn regulations," the bank said.

"The total value of transactions which did not follow the U-turn was under $14m."

The so-called U-turn transactions are those started outside the US by non-Iranian foreign banks that pass through the US financial system on the way to other non-Iranian foreign banks.

How Iran receives dollars for oil

To ascertain whether these transactions are permitted or not under current regulations, US clearing banks use the wire-transfer messages they get from the banks involved.

If the banks do not have enough information, they are supposed to freeze the assets.

Senior management were also said to have codified their illegal procedures in formal operating manuals, including one labelled "Quality Operating Procedure Iranian Bank Processing".

Penelope Lepeudry, managing director of Kroll Advisory Solutions, a consulting firm specialising in financial investigations, told the BBC that "if the allegations are confirmed, this is a very serious development".

"The regulators are not going to be merely convinced by a statement from the bank - they need to see the details," she said.

Other schemes found

The regulator said it had also uncovered evidence with respect to what are apparently similar schemes to conduct business with other countries under sanctions - Libya, Burma and Sudan.

"Investigation of these additional matters is ongoing," it added.

Who is Standard Chartered?

  • Standard Chartered is headquartered in London and its chief executive and chairman are based in the UK capital
  • Its roots are in Asia; the Chartered Bank was founded by Royal Charter and opened in Bombay, Calcutta and Shanghai in 1858
  • Standard Chartered Bank was formed in 1969 through the merger of Standard Bank of British South Africa and the Chartered Bank of India, Australia and China
  • It currently makes two-thirds of its profit in Asia; only 10% of its operating profit last year came from the Americas and Europe
  • It currently has 1,700 offices in 70 territories
  • The bank made a pre-tax profit of $6.8bn in 2011
  • The bank's New York office was first granted its foreign-branch bank licence in 1976

The regulator said that its nine-month investigation, which involved looking through more than 30,000 pages of documents, including internal bank emails, showed that the bank reaped "hundreds of millions of dollars in fees".

"SCB's actions left the US financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes, and deprived law enforcement investigators of crucial information used to track all manner of criminal activity," it said.

'Staggering cover-up'

In numerous emails going back as far as 1995, Standard Chartered's lawyers advised on ways to go about circumventing US sanctions.

In March 2001, the bank's legal adviser counselled that "our payment instructions [for Iranian clients] should not identify the client or the purpose of the payment".

By 2006, there were concerns raised about the bank's conduct in its New York branch.

The chief executive for the Americas sent an email to London saying the programme needed to "evaluate if its returns and strategic benefits are... still commensurate with the potential to cause very serious or even catastrophic reputational damage to the group".

But those warnings were ignored by senior management in London in what the regulator called a "staggering cover-up".

Among the violations of the law, the bank is accused of:

  • falsifying business records
  • failing to maintain accurate books and records
  • failing to report misconduct to the regulator in a timely manner
  • evading federal sanctions

The US Treasury, which implements the sanctions, said that it treated violations "extremely seriously".


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  • rate this

    Comment number 638.

    629.Billythefirst "Quiz: What have the Chair of the ECB, unelected PM of Italy and Spanish Finance Minister got in common?"

    That's a nice one for the conspiracy theorists.

  • rate this

    Comment number 637.

    Standard Chartered sponsor my beloved Liverpool FC therefore they are ok with me.
    They also do tons of Charity work in Africa and Asia and as you know Iran.

  • rate this

    Comment number 636.

    @627 'Suilerua'
    Ever the diplomat as usual. I'm astounded you didn't mention any derogatory comments about Brits in your post? It appears to be a regular MO in most of your posts recently?

    Of course, I could be mistaken. Perhaps someone else was posting under your screen name?

  • rate this

    Comment number 635.

    @Mayfair69 - actually the US Government can apply a fine of up to $10m per violation, or up to double the transaction value; either way the fine could be much higher than SCB's profits if applied punitively. In addition they can issue jail sentences and could decide to suspend or revoke a US banking license which would have the same effect on SCB's reputation, credibility and credit rating.

  • rate this

    Comment number 634.

    I am sure the regulators love it when they scent a prey.

    If none of these happened, and everybody lived in peace and was clean as a whistle, it is obvious that there will be lots of people unemployed.

  • rate this

    Comment number 633.

    I do not think a tin pot regulator no one even in America has heard of should go public with baseless allegations especially at a time when world stock prices are so volatile. If they think they have evidence the matter should be investigated and dealt with properly not trumpeted to the media to make a name for some faceless official.

  • rate this

    Comment number 632.

    When SCB is found guilty, they have to pay the price just like any other instution that violate the laws of a country.This is a very interesting story unfolding!

  • rate this

    Comment number 631.

    621.gbcambridge "From what I understand the rules are clear. Standard Chartered went about breaking the rules in an organised fashion to maximise their profits and hence bonuses"

    But that's called business. If the Board isn't aiming for something like that shareholders need to replace it. SC has a long history and probably knows more about rules than the D.F.S, a bit of an upstart outfit.

  • rate this

    Comment number 630.

    Hmmm The US was happy enough to process U turn transactions as it wanted the oil to flow while pretending to the world it had sanctions in place. They wanted their banks to benefit from the business.

    Now they are all irate restrospectively about a loophole they allowed...

    Whiffs of hyprocricy methinks..

  • rate this

    Comment number 629.

    608. mayfair

    Goldman Sach got fined two years ago for there action in subprime loans and several bankers went to jail
    Strange that a company that has striven to lower the bar of bank ethics,as much, if not more, than any, supplies so many key staff to key institutions like WB IMF and BIS.
    Quiz: What have the Chair of the ECB, unelected PM of Italy and Spanish Finance Minister got in common?

  • rate this

    Comment number 628.

    While there is every reason to caution the Iranian leadership, without oil exports, the general population of Iran would suffer as a result of these sanctions.
    Petrol prices must also be affected, so would be increased if all Iranian exports were inhibited. [WE would ALL pay more].
    Banks would increase consumers cost so we would suffer too.

    A better more practical direct diplomacy is required.

  • rate this

    Comment number 627.

    337 I'm sure there were many merchants who felt the same way about restricting the sale of military use materials to Nazi Germany before WWII, some of which was used against Britain. Don't you people ever learn?

  • rate this

    Comment number 626.

    There have been plenty of prosections of bent bankers in NY. Not enough perhaps and no doubt Wall St still stinks to high heaven.

    Over here? Nothing. Nothing at all. Not even a change in the law.

    Even though the behaviour of London offices has done so much damage to firms like Lehmans, JP Morgan, UBS.

    What all the City grovellers are rambling on about on here defeats me

  • rate this

    Comment number 625.

    @612 'Conceited of Cambridge'
    Yes, I appreciate your post. However, the drug gangs in Ireland have gone way beyond the IRA. The mayhem created by these growing gangs, upon Irish people, is not what tourists see.

    The reality is that intimidation by these cash gangs are driving law-abiding Irish people out of their homes and villages. Creating enclaves of their own - with no law, but their own

  • rate this

    Comment number 624.


    Outcome....Management sent to bed early without supper, but only after a good Telling Off!

    Why do we have to put up with these dubious businesses HQ'ing themselves in London and giving the City even more of a bad name..

  • rate this

    Comment number 623.

    Open up the accounts, put a trace on the money traffic, you will find more than one bank involved. Ignorance is no defence, if you have traded with this money knowingly or not you are guilty - that is the law worldwide not just USA.

  • rate this

    Comment number 622.

    606.Man in London "At least in the US we get scapegoats, in the UK nobody has gone to prison, even when they stole billions"

    But the US scapegoat is rarely the guilty person. You only need look at the BP fiasco to check that. And why weren't regulators put in jail over the Madoff biz? They were warned enough.

  • rate this

    Comment number 621.

    From what I understand the rules are clear. Standard Chartered went about breaking the rules in an organised fashion to maximise their profits and hence bonuses. None of this will stop until personal responsibility for these actions is identified. I am afraid that the only way for this to be taken seriously is for criminal prosecutions to follow, together with a claw-back of appropriate bonuses.

  • rate this

    Comment number 620.

    "Strangely Citibank and Bank of America who allegedly trade in $ trillions of laundered money via correspondent banking have not been touched."

    Ever heard of Wachovia? Big court case? Clearly not. Wouldn't suit your inexplicable sense of grievance

    US might be throwing its weight about but they have locked up plenty of their own. Maybe sick of waiting for the FSA & SFO?

  • rate this

    Comment number 619.

    This has nothing to do with the Financial Crisis. This is about money laundering and if (note: IF) Standard Charter are guilty then they will no doubt be punished.


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