Tuesday, August 7, 2012
Standard Chartered branded a "rogue institution" after alleged illegal dealings with Iran
One of the world's biggest banks is being pursued by US regulators over claims that it violated anti-terror laws by dealing with Iran.
The London-based Standard Chartered Bank has been branded as a "rogue institution" after allegedly hiding transactions valued at US$250 billion.
The bank has rejected the claim, but the scandal could see Standard Chartered stripped of its licence for the state of New York which could ultimately cut if off from lucrative US financial markets.
According to New York's Department of Financial Services, Standard Chartered is a "rogue institution" that broke US law and exposed America's banking system to terrorists, drug traffickers and corrupt states.
The department claims the bank "schemed" with the Iranian government to conduct 60,000 secret transactions that generated hundreds of millions of dollars in fees.
The dealings go back as far as 2006 when, it alleged, Standard Chartered insider debated whether to continue the Iranian dealings.
A top US-based employee warned head office in London that the dealings could cause "catastrophic reputational damage" and "serious criminal liability".
A top executive in London shot back: "You f---ing Americans. Who are you to tell us, the rest of the world, that we're not going to deal with Iranians."
Regulators say that reply shows an obvious contempt for US banking regulations and already there are moves to strip Standard Chartered of its New York licence which allows it to process US$190 billion every day.
The loss of a New York banking license would be a devastating blow as it would cut off direct access to the lucrative US financial services sector.
Meanwhile Standard Chartered issued a statement rejecting the claims and says it ceased all new business in any currency with Iranian customers over five years ago.
"The Group takes its responsibilities very seriously, and seeks to comply at all times with the relevant laws and regulations. It is in this spirit we initiated this review and have engaged with the US agencies."
Investigations are focussing on so-called "u-turn" transactions where Standard Chartered allegedly moved money for Iranian clients among banks in Britain and Middle East and cleared through Standard Chartered's New York branch, but which neither started nor ended in Iran.
Such transactions have been illegal since November 2008, when the Treasury Department banned them on concerns that they were being used to evade sanctions, and that Iran was using banks to fund nuclear and missile development programs.
Standard Chartered shares dived six percent in late London trade and fell as much in seven percent when they opened in Hong Kong this morning.