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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 ravaged by Iran claims

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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13 comments so far. Why not have your say?

Morality 1

Aug 07, 2012 at 12:21

1. Another strike by the US on the UK financial community - why report on this now if review of transactions have been going on for so long - maybe divert from US current status / presidential race?

2. What a buying opportunity once the hysteria is over for a very substantial and creditable institution

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georges

Aug 07, 2012 at 12:23

Massive over reaction to a state regulator especially with the silence from the US Fed and home regulator. worth looking at the SCB statement - has facts that seem sparse in the US submission - and also shows this has been subject of discussion since 2009. Wonder who lost patience and why?

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Chris Clark

Aug 07, 2012 at 12:38

Well, it seems like there's two points here. Firstly, whilst the 'U' Turn mechanism might give SC an out up till 2008 , if it is the case that most or all 60,000 messages were 'wire stripped' and if they hadn't they would certainly have been frozen, then this would indicate sanctions breaking on a large scale.

The second one is exactly what transactions did take place after 2008.

It also seems to be the case that few banks survive a regulatory investigation for fraud, the facts seem usually well founded. (Wachovia & Mexico drug runners, HSBC & Mexico, unrelated but Wal-Mart in Mexico, UK Banks and LIBOR.)

Where's all this going to end?

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Nicholas Kendal

Aug 07, 2012 at 12:54

Higher Tollers?

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Michael Peters Fenwicks

Aug 07, 2012 at 13:00

I say hold your guns as this is a buying opportunity while allowing a few more days or even perhaps until the hearing on the 15 August .

Sit tight and enjoy the ride.........I smell an opportunity as for sometime I wondered how long this bank would stay clean.

Who is next?

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normski 2nd

Aug 07, 2012 at 13:09

So can we now screw yankee banks for co-operating with noraid, selling arms to the Taliban and so on.

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Tony Ash

Aug 07, 2012 at 14:05

An American said to me, " We are the bullies of the World ".

Well done SCB! ( Sould it all be true!!!)

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derek farman

Aug 07, 2012 at 14:16

Well i guess they are the first to be caught . I suspect there are a whole slew of banks around the world who assist in nefarious operations such as this . It seems when money is the issue for bankers, morality goes out of the window.

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fair play11

Aug 07, 2012 at 14:57

American banks are allowed to trade with drug dealers, militants, oppressive states and dictators if it facilitates the US. Selling guns, bullets or attack aircraft is ok. Let the USA set an example and stop all these dirty trades by US companies.

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Anonymous 1 needed this 'off the record'

Aug 07, 2012 at 15:38

Barclays, Lloyds, and Credit Suisse were all fined for similar acts in 2009/10

http://www.guardian.co.uk/business/2010/aug/16/barclays-fined-for-sanction-breaking

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Supo

Aug 07, 2012 at 16:50

It is really disgusting the way people leave the issue at stake when making their comments, talking about things that are not really directly related. The truth is that this bank is a rogue institution! Full stop. When through investigations are conducted, it will be discovered that their roegueish behaviour is not only with Iran but with many despotic regimes all over the world.

Unless Western countries deal with the issue of blood money circulating in the financial system, terrorism will continue to be on the rise and continue to put the life of people in danger.

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DIY

Aug 07, 2012 at 19:00

So another non-USA institution is being lined up to fund the U.S. deficit.

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Anonymous 2 needed this 'off the record'

Aug 07, 2012 at 21:03

The Wall Street wheeler dealers and banks nearly brought the whole system down in 2008 flogging the CDO pyramid con to themselves and exporting it World wide. Will we get restitution? No chance - poodles just nip they don't bite.

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