Standard Chartered and the angry regulator

Standard Chartered is to pay $340m to the New York Department of Financial Services (DFS) [1] over the State regulator’s findings that it stripped and “repaired”, that is altered originator details in wire transfers to disguise Iranian payments worth at least $250bn between 2001 and 2007. In an order notice issued on 6 August 2012 [2], the DFS demanded that the UK group’s US subsidiary, Standard Chartered Bank (SCB), which it called a “rogue institution”, demonstrate why its licence to operate in the State of New York should not be revoked. SCB currently clears approximately $190bn per day for international clients. The bank was summoned to appear at the regulator’s office on 15 August but Peter Sands, Standard Chartered Group CEO, pre-empted the meeting by flying in to negotiate terms.

Timon Molloy, Editor (timon.molloy@informa.com)

In its order the DFS cites manipulation of data on around 60,000 ‘U-turn’ transactions – payments via non-US banks involving Iranian entities that US institutions could process under strict conditions until they were prohibited in November 2008. The bank, it says, either removed evidence of any Iranian connection from the SWIFT message, substituting false details, or returned it to the client to amend and resubmit. An independent consultant determined that about 30,000 messages were sent to SCB’s New York branch by SCB’s London office, “mainly on behalf of state-owned Iranian banks”, while the remainder came from SCB’s Dubai branch for Iranian-owned banks, companies and other unknown parties.