As you can see from this morning’s headlines, Standard Chartered Bank (SCB) is being investigated for supporting Iranian banks and businesses, much to the irritation of the US Authorities.
The newly formed New York State Department of Financial Services (DFS) – note, this is not a Federal Institution but the New York equivalent of the FSA – issued a draft report stating that:
“For almost ten years, SCB schemed with the Government of Iran and hid from regulators roughly 60,000 secret transactions, involving at least $250 billion, and reaping SCB hundreds of millions of dollars in fees. SCB’s actions left the U.S. 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.”
Systematically throughout the last decade, the bank is alleged to have not only processed transactions via the USA for Iranian banks, but to have stripped out all information that would have made this obvious. In other words, disguising these transactions as non-Iranian.
The bank is also viewed as being anti-American in its approach as demonstrated by this exchange between their US and London offices:
“In short, SCB operated as a rogue institution. By 2006, even the New York branch was acutely concerned about the bank’s Iran dollar-clearing program. In October 2006, SCB’s CEO for the Americas sent a panicked message to the Group Executive Director in London. ‘Firstly,’ he wrote, ‘we believe (the Iranian business) needs urgent reviewing at the Group level 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.’ His plea to the home office continued: ‘(s)econdly, there is equally important potential of risk of subjecting management in US and London (you and I) and elsewhere to personal reputational damages and/or serious criminal liability.’ (Emphasis added.)
Lest there be any doubt, SBC’s obvious contempt for US banking regulations was succinctly and unambiguously communicated by SCB’s Group Executive Director in response. As quoted by an SCB New York branch officer, the Group Director caustically replied: ‘You f-ing Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians.’”
The bank effectively became a “front for prohibited dealings with Iran – dealings that indisputably helped sustain a global threat to peace and stability.”
This was all done in cahoots with their auditors, Deloitte, who “apparently aided” the bank and had “intentionally omitted critical information” when submitting its reports to regulators.
Deloitte was hired to conduct a review after Standard Chartered was ordered to correct anti-money laundering lapses by New York and federal regulators in 2004.
This all sounds very serious and could result in Standard Chartered losing their American banking licence … but it won’t.
This is just sabre rattling by a new regulator making a headline grab, if you ask me.
The reason I say this is that the authorities will find that almost every bank is engaged in this kind of activity if they look hard enough:
- HSBC faces $1bn fine in anti-money laundering control breach
- ING to Pay $619 Million Fine Over Cuba, Iran Dealings - WSJ.com
- FSA fines Credit Suisse £6m for poor controls - FT.com
- Coutts fined £8.75 million for anti-money laundering control failings
- RBS reveals U.S. money laundering probe | This is Money
And that includes American banks:
In fact, according to the FSA, who performed a review of 27 banks last year, three-quarters of them don’t have effective controls:
“Three quarters of the banks in our sample failed to take adequate measures to establish the legitimacy of the source of wealth and source of funds to be used in the business relationship.”
No surprise here then.