View the article online at http://citywire.co.uk/money/article/a609785
Standard Chartered ravaged by Iran claims
(Update) Bank’s shares tumble 24% on claims it moved $250 billion for the Iranian government, exposing US financial system to ‘terrorists’ and ‘drug kingpins’.
Standard Chartered (STAN.L) has been hit with accusations from the New York State financial regulator that it operated as a 'rogue institution' and exposed the US financial system to ‘terrorists’ and ‘drug kingpins’ by working for the Iranian government for almost 10 years.
The New York State Department of Financial Services (DFS) alleges the bank hid 60,000 transactions with the Iranian government involving at least $250 billion, which generated millions of dollars in fees.
Shares in Standard Chartered slumped 24% to £11.16 to their lowest level in 10 months as investors panicked over the threat of lasting reputational damage accompanied by the possibility of a large fine and the loss of its banking licence in New York State. Analysts at Shore Capital said the news dealt a 'hammer blow' to the investment case.
The DFS will question the company on 15 August. It says further evidence has been uncovered that the bank engaged in similar business for other sanctioned regimes including Libya, Burma and Sudan, which are subject to ongoing investigations.
The regulator claims the bank conspired to move money through its New York branch for Iranian clients since 2001, including the Central Bank of Iran, Bank Melli and Bank Saderat, all of which were subject to US sanctions.
In a strongly-worded statement, the DFS says the bank’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’.
The investigation into the bank was led by Benjamin Lawsky (pictured below), superintendent of the DFS, which aims to prevent systemic risk and protect consumers in New York’s financial services industry.
The DFS also says that in its ‘zeal to make hundreds of millions of dollars at almost any cost’ the bank engaged in ‘willful and egregious violations of law’.
Accusations levelled at Standard Chartered include falsifying business records, offering false instruments for filing, failing to maintain accurate books and records, obstructing government administration, failing to report misconduct to the Department, and evading sanctions.
Running rings around the regulators
The regulator is concerned with transactions carried out by the bank, known as ‘U-turns’, in which certain transactions for Iranian clients were permitted as long as they originated with offshore, non-Iranian foreign banks. If the transactions didn’t comply with strict regulations the money would be frozen by US clearing banks.
It is claimed Standard Chartered moved money by ‘U-turns’ from British and Middle Eastern banks though the New York branch of Standard Chartered on behalf of Iranian clients, masking the origin of the money.
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