http://www.nakedcapitalism.com/2012/08/so-where-were-the-feds-ny-banking-superintendent-standard-chartered-a-rogue-institution-made-250-billion-of-illegal-transfers-with-iran.html
As early as 1995, soon after President Clinton issued two Executive Orders announcing U.S. economic sanctions against Iran, SCB’s General Counsel embraced a framework for regulatory evasion. He strategized with SCB’s regulatory compliance staff by advising that “if SCB London were to ignore OFACs regulations AND SCB NY were not involved in any way & (2) had no knowledge of SCB Londons [sic] activities & (3) could not be said to be in a position to control SCB London, then IF OFAC discovered SCBLondons [sic] breach, there is nothing they could do against SCB London, or more importantly against SCBNY.” He also instructed that a memorandum containing this plan was “highly confidential & MUST NOT be sent to the US.” (emphasis in original)
And Deloitte Touche is depicted of being critical to this scheme:
The filing recounts how eager SBC was to get the business in 2001 for acting as recipient bank for the proceeds of Iran’s dollar based oil sales, roughly $500 million a day. This required SBC to deal directly with a sanctioned bank and was seen as attractive in its own right and as providing an entre to other Iranian, as in sanctioned, banks. The Iranians emphasized they wanted the transcations processed quickly (code for they did not want to run the risk of having funds seized) and asked for SCB to pay funds in advance of receipts, up to $200 million a day! To put it mildly, this level of financial exposure would motivate SCB to make sure the arrangement was not uncovered. Even though SCB ascertained that its New York branch would have to be fully appraised of transaction/customer information to be in compliance with the law, it instead provided false details in the SWIFT data fields. And this procedure, and the fact that it was done on behalf of Iranian banks, was commemorated in SCB operating manuals. .
TUESDAY, AUGUST 7, 2012
Where Are the Feds? NY Banking Superintendent: Standard Chartered a “Rogue Institution,” Made $250 Billion of Illegal Transfers With Iran
The New York Superintendent of Financial Services dropped a bombshell today, filing an order against Britain’s Standard Chartered Bank. It charges the bank with having engaged in at least $250 billion of illegal transactions with Iranian banks, including its central bank, from 2001 to 2010, and of engaging in similar schemes with Libya, Myanmar and Sudan (those investigations are in progress). It threatens SCB with the loss of its New York banking license and termination of access to dollar clearing services. The latter alone is as huge deal. You are not a real international bank unless you have dollar clearing. Sumitomo Bank looked at giving up its US banking license in 1985 when it was examining deal structures for making an investment in Goldman, and ascertained that giving up access to Fedwire would cost it over $100 million a year and considerably weaken its position in Japan. SCB is certain to be a much more active dollar player than Sumitomo was and the volume of international transactions has grown hugely since then.
SCB squealed like a stuck pig, claiming that only $14 million of transactions were out of compliance. But the bank
has nowhere to go. The NY Superintendent, Benjamin Lawsky, has made his determination. The only thing open for discussion is what sort of punishment he is going to impose. The bank must
…submit to and pay for an independent, on-premises monitor of the Department’s selection to ensure compliance with rules governing the international transfer of funds.
SCB is also up for a license revocation hearing and needs to “demonstrate” why it should not be suspended from clearing dollar transactions in the interim. Having poised a sword of Damocles over the bank’s head, I would expect Lawsky to demand a lot to make this go away, ideally including some executives’ heads as proof the bank was turning over a new leaf (the filing notes that any moneydamages are to be determined). The flip side is Lawsky may come under pressure precisely because he has shown up the Treasury, Fed, and DoJ. This is a Spitzer-level move from an unexpected source.
Bear in mind, the facts presented are far worse than the Libor price fixing that led to the departure of Barclays’ chairman, CEO, and president. Lawsky has evidence that this scheme was devised at the senior levels of the bank, while the Barclays Libor actions took place at comparatively low levels (although it is hard to believe there was not knowledge at executive levels prior to the October 2008 conversations between the Bank of England’s Paul Tucker and Bob Diamond).
The filing is riveting reading. In very simple terms, SCB altered (“repaired”) wire transfer information so as to omit the fact that Iranian banks were involved. By way of background, “U-turns” were a permitted transaction with Iranian banks and individuals, when the recipient and sender of the wire were both non-US, non-Iranian banks (although they might represent an Iranian party). The compliance requirements were stringent; funds were to be frozen if a transfer request did not have enough information to determine whether or not it was with a sanctioned party. But that was no deterrent to SCB:
As early as 1995, soon after President Clinton issued two Executive Orders announcing U.S. economic sanctions against Iran, SCB’s General Counsel embraced a framework for regulatory evasion. He strategized with SCB’s regulatory compliance staff by advising that “if SCB London were to ignore OFACs regulations AND SCB NY were not involved in any way & (2) had no knowledge of SCB Londons [sic] activities & (3) could not be said to be in a position to control SCB London, then IF OFAC discovered SCBLondons [sic] breach, there is nothing they could do against SCB London, or more importantly against SCBNY.” He also instructed that a memorandum containing this plan was “highly confidential & MUST NOT be sent to the US.” (emphasis in original)
21. Years later, another SCB executive closely weighed the costs and benefits of concealing the identities of Iranian Clients. He observed that “the current process under which some SWIFT messages are manually ‘repaired’ to remove reference to Iran could (despite accepted SWIFT protocols) be perceived by OFAC [U.S. Office of Foreign Assets Control] as a measure to conceal the Iranian connection from SCB NY, and therefore evade their controls for filtering Iran-related payments. Unless transactions are repaired they face delays caused by investigations in the U.S.A footnote to this section quotes an e-mail from the general counsel to the compliance manager on precisely how the wire instructions are to be doctored.banking system, subjecting SCB to interest claims. He described SCB‟s repair procedures as a “process to check that a payment is, prima facie, an acceptable U-turn transaction (i.e. offshore to offshore),” and fully acknowledged that “they do not provide assurance that it does not relate to a prohibited transaction, and therefore SCB NY is exposed to the risk of a breach of sanctions.” (emphasis added).”
And Deloitte Touche is depicted of being critical to this scheme:
SCB carefully planned its deception and was apparently aided by its consultant Deloitte & Touche, LLP (“D&T”), which intentionally omitted critical information in its “independent report” to regulators. This ongoing misconduct was especially egregious because – during a key period between 2004 and 2007 – SCB‟s New York branch was subject to a formal supervisory action by the Department and the Federal Reserve Bank of New York (“FRBNY”) for other regulatory compliance failures involving the Bank Secrecy Act (BSA”), anti-money laundering policies and procedures (“AML”), and OFAC regulations.If Lawsky indeed has the goods on Deloitte, this is the sort of thing which ought to put it out of business, except all of the Big Four accounting firms have “too big” or more accurately, “too few” to fail status.
The filing recounts how eager SBC was to get the business in 2001 for acting as recipient bank for the proceeds of Iran’s dollar based oil sales, roughly $500 million a day. This required SBC to deal directly with a sanctioned bank and was seen as attractive in its own right and as providing an entre to other Iranian, as in sanctioned, banks. The Iranians emphasized they wanted the transcations processed quickly (code for they did not want to run the risk of having funds seized) and asked for SCB to pay funds in advance of receipts, up to $200 million a day! To put it mildly, this level of financial exposure would motivate SCB to make sure the arrangement was not uncovered. Even though SCB ascertained that its New York branch would have to be fully appraised of transaction/customer information to be in compliance with the law, it instead provided false details in the SWIFT data fields. And this procedure, and the fact that it was done on behalf of Iranian banks, was commemorated in SCB operating manuals. .
By 2003, SCB’s outside counsel for the US was hectoring the bank for failing to comply with the law and the spirit of OFAC; London staff shrugged it off, regarding the secrecy as necessary since they wanted to keep the business. And as SCB’s competitors heeded warnings like this and exited the Iran business, SCB happily filled the void. I strongly suggest you read the actual filing; it details the additional ruses the bank engaged in over the years, all with the supervision and approval of senior legal and business officers.And the piece de resistance is the role played by Deloitte. In 2003, SCB was sanctioned by the New York Fed and the New York banking superintendent for serious lapses in filing suspicious activity reports and customer due diligence. As part of the settlement, SCB had to hire an independent monitor. That monitor, Deloitte, instead decided it was much better off aiding SCB in figuring out how to evade the rules:
But it also appears that Lawsky has end run, as in embarrassed, the Treasury and the New York Fed. As part of its defense, SCB contends it was already cooperating with Federal regulators:
Bloomberg points out that the current management team has long tenures in the bank, meaning they will deservedly be in the cross hairs. And Peter Rudegeair at Reuters tells us they’ve been horribly sanctimonious too.
44…In August and September 2005, D&T unlawfully gave SCB confidential historical transaction review reports that it had prepared for two other major foreign banking clients that were under investigation for OFAC violations and money laundering activities. These reports contained detailed and highly confidential information concerning foreign banks involved in illegal U.S. dollar clearing activities.The filing contains even more salacious detail on the extent of the flouting of the law and the misrepresentations to regulators.
45. Having improperly gleaned insights into the regulators‟ concerns and strategies for investigating U-Turn-related misconduct, SCB asked D&T to delete from its draft “independent” report any reference to certain types of payments that could ultimately reveal SCB‟s Iranian U-Turn practices. In an email discussing D&T‟s draft, a D&T partner admitted that “we agreed” to SCB‟s request because “this is too much and too politically sensitive for both SCB and Deloitte. That is why I drafted the watered-down version.”
But it also appears that Lawsky has end run, as in embarrassed, the Treasury and the New York Fed. As part of its defense, SCB contends it was already cooperating with Federal regulators:
In January 2010, the Group voluntarily approached all relevant US agencies, including the DFS, and informed them that we had initiated a review of historical US dollar transactions and their compliance with US sanctions…The Group waived its attorney-client and work product privileges to ensure that all the US agencies would receive all relevant information.The agencies in question are “DFS, the Department of Justice, the Office of Foreign Assets Control, the Federal Reserve Group of New York and the District Attorney of New York.”
Bloomberg points out that the current management team has long tenures in the bank, meaning they will deservedly be in the cross hairs. And Peter Rudegeair at Reuters tells us they’ve been horribly sanctimonious too.
The lack of action by everyone ex the lowly New York banking supervisor is mighty troubling. The evidence presented in Lawsky’s filing is compelling; he clearly has not gone off half cocked. Why has he pressed forward and announced this on his own? The Treasury Department’s Office of Terrorism and Financial Intelligence has supposedly been all over terrorist finance; the consultants to that effort typically have very high level security clearances and top level access (one colleague who worked on this effort in the Paulson Treasury could get the former ECB chief Trichet on the phone). For them not to have pursued it anywhere as aggressively as a vastly less well resourced state banking regulator, particularly when Iran is now the designated Foreign Enemy #1, does not pass the smell test.
Of pots and kettles - Brits strike back as to perceived UK bashing ....
http://ftalphaville.ft.com/blog/2012/08/07/1109481/a-regulator-gone-rogue-maybe-maybe-not/
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9457878/Standard-Chartered-rejects-US-Iran-transaction-claims.html
The review was conducted by external counsel and external consultants and Standard Chartered waived its attorney-client and work product privileges to ensure that all the US agencies would receive all relevant information.
http://www.guardian.co.uk/global/2009/dec/13/drug-money-banks-saved-un-cfief-claims
( while the fact that money laundering was relied on by the big banks in US and Europe to weather the first part of the ongoing financial crisis , what we see is that the numbers thought to have been laundered turned out to be low - if 352 billion was laundered just in 2008.... AS an aside , with the HSBC and Standard Chartered news , guess the BBA has their proof....)
http://www.zerohedge.com/news/jpm-refuses-comply-broad-pfg-subpoena
Submitted by Tyler Durden on 08/06/2012 17:52 -0400
http://www.guardian.co.uk/business/2012/aug/06/standard-chartered-iran-transactions?CMP=twt_fd
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9457486/Standard-Chartered-faces-Wall-Street-exit-over-Iran-claims.html
At a minimum, this lack of sufficient inquisitiveness on behalf of the Feds would the bank snookered them by being terribly forthcoming (as in it was responding only to specific inquiries, and then as narrowly as possible). But it raises the more troubling specter that Federal regulators (oh, and the US Department of Justice) wanted to keep this all quiet so as not to lead to embarrassing headlines. Although there is nothing in the filing to point to failure to act by the New York Fed, which was presumably the lead party in the 2003 sanctions against SCB (indeed, it says specifically that SCB deceived Federal regulators), the flip side is there would be only downside to Lawsky in doing anything that would make Fed or Treasury think he was trying to make then look bad.
There was a huge furor in the UK over who among the banking regulators knew what when on the Libor scandal. If our Congresscritters are at all worth their salt, they ought to be putting Geithner and the relevant folks at the New York Fed under the hot lights. We’ll see soon enough how the Fed and Treasury play this. If they don’t launch parallel actions pronto, it will be a damning sign as to where they think their, and perhaps most importantly, Geithner’s, interests lie.
There was a huge furor in the UK over who among the banking regulators knew what when on the Libor scandal. If our Congresscritters are at all worth their salt, they ought to be putting Geithner and the relevant folks at the New York Fed under the hot lights. We’ll see soon enough how the Fed and Treasury play this. If they don’t launch parallel actions pronto, it will be a damning sign as to where they think their, and perhaps most importantly, Geithner’s, interests lie.
Of pots and kettles - Brits strike back as to perceived UK bashing ....
http://ftalphaville.ft.com/blog/2012/08/07/1109481/a-regulator-gone-rogue-maybe-maybe-not/
A regulator gone rogue? Maybe, maybe not
At pixel time, shares in Standard Chartered were down 31 per cent from the point at which this was published — an “Order Pursuant to Banking Law No 39,” issued by the New York State Department of Financial Services.
In lurid detail, this sets out the claim that the London-based EM bank willfully evaded US sanctions against Iran over the course of a decade.
Now, quite a few people (including this correspondent) are owning up to not having heard of the New York State DFS previously. Jonathan Guthrie, in a lucid Lombard note, reckons this might partly explain the grandstanding tone of the order: the department was only created last year (by New York governor Andrew Cuomo) and needs to make a name for itself…
The mini watchdog’s language was as frothy as any politician’s stump re-election speech. It claimed that StanChart’s actions had “left the US financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes”. The substance of the accusation is that bank staff outside the US deliberately omitted or removed the names of Iranian clients from dollar payment orders that were routed via New York, but did not originate or terminate there. The aim was to avoid regulatory hold-ups to deals that might or might not have been permissible.Was this illegal? Lawyers may grow fat, rich and old debating the point. The J Edgar Hooverish broadside of the NYDFS does not pack the same punch as a senate committee’s accusation of money laundering violations against HSBC. But StanChart has serious explaining to do if it is to retain its status as uniquely scrupulous.
StanChart, for its part, is acting all shocked and hurt. A hastily drafted statement, issued at about 1am London time, protests that what the DFS calls “wire-stripping” — changing docket details to disguise the parties involved — was actually accepted practice under the so-called “U-turn” arrangements that allowed Iran to sort of trade normally, internationally, in the years up until 2008.In November that year (just as Wall Street was melting) the U-turn arrangements were revoked and sanctions against Iran were tightened up considerably. Over this period, StanChart appears to accept that it made some transgressions. These were being investigated and the matter has been under discussion with a whole battery of US regulators. But going on the bank’s figures, the suspect trades are in the region of $14m, rather than the $250bn flashed around by the DFS.The clear implication is that the real story here is about a regulator gone rogue.Indeed, John Mann, the Labour firebrand who gave Barclay’s Bob & Co such a rough ride in front of the Treasury Select Committee recently, tried to stir this up on Tuesday with a statement calling for a UK Parliamentary inquiry into money laundering…Mann is concerned about the scale of money laundering, but also about an increasing anti-British bias by US regulators and politicians, aimed in his view in shifting financial markets from London to New York.Mann is highlighting secret deals by US banks such as the Bank of America and Wachovia to close down investigations and ongoing investigations, including into, Nigerian fraud involving Wells Fargo and M&T, Mexican drug cartels such as the Los Zetos and Indonesia criminals in Jakarta using Citibank. In particular drug money from Colombia and Mexico is being routinely laundered through US banks, but the US authorities are choosing to highlight British banks rather than their own wrong doings.
Yet the StanChart share price is not saying this is about pots and kettles. The markets are actually pricing in the possibility that this bank might loose its New York banking license, along with its ability to clear US dollar transactions – something that would effectively cripple an institution whose business is largely based on international trade finance.Why so? Sandy Chen of Cenkos sums it up nicely. It’s about trust. Investors feel they have been kept in the dark…Standard Chartered (STAN LN, £35bn, 1470p, Buy to Sell) Whilst noting that the other UK banks have also admitted to breaching US money laundering operations, it’s the juxtaposition of STAN’s smug 1H12 results presentation only a week ago with the now-documented evidence of a long-standing pattern of senior management deceit that rankles most. Amidst the 124 pages with fine words about culture and values, there was one cursory paragraph mentioning a review of historic US sanctions compliance. Mr Market won’t forgive this breach of its trust for many years, we expect…We have been Buyers of STAN for the vast bulk of the past decade; we downgrade to Sell, because we regard this as hugely damaging to its global franchise.
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9457878/Standard-Chartered-rejects-US-Iran-transaction-claims.html
7:37AM BST 07 Aug 2012
190 Comments
The bank's London listed shares plunged nearly 15pc on Tuesday after New York’s top financial regulator claimed “flagrantly deceptive actions” by the British bank left the US “vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes”.
In a statement issued on Tuesday,Standard Chartered said that it "strongly rejects the position and portrayal of facts" by the regulator, and that "99.9pc of the transactions relating to Iran" complied with regulations.
The bank said it does not believe the order issued by the New York State Department of Financial Services (DFS) presents "a full and accurate picture of the facts".
Standard Chartered said it had voluntarily approached all the relevant US agencies in January 2010, including the DFS. It informed them that it was reviewing all "historical US dollar transactions and their compliance with US sanctions". The review focused on transactions relating to Iran in the period 2001-2007 and "their compliance with the U-turn framework established by the US authorities to enable ongoing US dollar trade with Iran by other countries".
The bank said it does not believe the order issued by the New York State Department of Financial Services (DFS) presents "a full and accurate picture of the facts".
Standard Chartered said it had voluntarily approached all the relevant US agencies in January 2010, including the DFS. It informed them that it was reviewing all "historical US dollar transactions and their compliance with US sanctions". The review focused on transactions relating to Iran in the period 2001-2007 and "their compliance with the U-turn framework established by the US authorities to enable ongoing US dollar trade with Iran by other countries".
The review was conducted by external counsel and external consultants and Standard Chartered waived its attorney-client and work product privileges to ensure that all the US agencies would receive all relevant information.
Standard Chartered said it gave regular updates and presentations to the DFS and the other agencies on the results of its investigation, including several thousands of pages of documents and interview notes, plus analysis of approximately 150 million payment messages.
http://www.guardian.co.uk/global/2009/dec/13/drug-money-banks-saved-un-cfief-claims
( while the fact that money laundering was relied on by the big banks in US and Europe to weather the first part of the ongoing financial crisis , what we see is that the numbers thought to have been laundered turned out to be low - if 352 billion was laundered just in 2008.... AS an aside , with the HSBC and Standard Chartered news , guess the BBA has their proof....)
Drug money saved banks in global crisis, claims UN advisor
Drugs and crime chief says $352bn in criminal proceeds was effectively laundered by financial institutions
Email
Drugs money worth billions of dollars kept the financial system afloat at the height of the global crisis, the United Nations' drugs and crime tsar has told the Observer.
Antonio Maria Costa, head of the UN Office on Drugs and Crime, said he has seen evidence that the proceeds of organised crime were "the only liquid investment capital" available to some banks on the brink of collapse last year. He said that a majority of the $352bn (£216bn) of drugs profits was absorbed into the economic system as a result.
This will raise questions about crime's influence on the economic system at times of crisis. It will also prompt further examination of the banking sector as world leaders, including Barack Obama and Gordon Brown, call for new International Monetary Fund regulations. Speaking from his office in Vienna, Costa said evidence that illegal money was being absorbed into the financial system was first drawn to his attention by intelligence agencies and prosecutors around 18 months ago. "In many instances, the money from drugs was the only liquid investment capital. In the second half of 2008, liquidity was the banking system's main problem and hence liquid capital became an important factor," he said.
Some of the evidence put before his office indicated that gang money was used to save some banks from collapse when lending seized up, he said.
"Inter-bank loans were funded by money that originated from the drugs trade and other illegal activities... There were signs that some banks were rescued that way." Costa declined to identify countries or banks that may have received any drugs money, saying that would be inappropriate because his office is supposed to address the problem, not apportion blame. But he said the money is now a part of the official system and had been effectively laundered.
"That was the moment [last year] when the system was basically paralysed because of the unwillingness of banks to lend money to one another. The progressive liquidisation to the system and the progressive improvement by some banks of their share values [has meant that] the problem [of illegal money] has become much less serious than it was," he said.
The IMF estimated that large US and European banks lost more than $1tn on toxic assets and from bad loans from January 2007 to September 2009 and more than 200 mortgage lenders went bankrupt. Many major institutions either failed, were acquired under duress, or were subject to government takeover.
Gangs are now believed to make most of their profits from the drugs trade and are estimated to be worth £352bn, the UN says. They have traditionally kept proceeds in cash or moved it offshore to hide it from the authorities. It is understood that evidence that drug money has flowed into banks came from officials in Britain, Switzerland, Italy and the US.
British bankers would want to see any evidence that Costa has to back his claims. A British Bankers' Association spokesman said: "We have not been party to any regulatory dialogue that would support a theory of this kind. There was clearly a lack of liquidity in the system and to a large degree this was filled by the intervention of central banks."
so when do we see how much JPM laundered or C or BAC ? ?
http://www.zerohedge.com/news/jpm-refuses-comply-broad-pfg-subpoena
JPM Refuses To Comply With Broad PFG Subpoena
Last week we wrote that we were not surprised to learn that the first party of interest in the PFG bankruptcy was "none other than JPMorgan, which together with various other banks, will be the target of a subpoena by the PFG trustee." We added "How shocking will it be to find that Dimon's company is once again implicated in this particular episode of monetary vaporization." It appears that we were not the only ones shocked to learn that Jamie Dimon's firm could make a repeat appearance again when it comes to missing client money: JPM itself seems to not have expected this development. The result, as just reported by Reuters: "JPMorgan Chase & Co on Monday sought to limit the power the bankruptcy trustee for Peregrine Financial Group has to subpoena information from financial institutions that did business with the failed brokerage." Why, whatever may JPMorgan be hiding, and whyever is it taking preemptive steps from preventing such information from leaking into the public domain: because it is too "burdensome" - it is only logical that Jamie can not dedicate one person of his 261,453 employees to this modest matter. No fear though: even if it is found that just like in the MF Global bankruptcy JPM may have overreached just a tad when it comes to money that doesn't belong to it, the CFTC can just say that as a result of an extensive 4 year investigation, JPM was found to have done nothing wrong, and if the public can please already disperse.
Per Reuters:
JPMorgan said in a court filing that Trustee Ira Bodenstein's request for authorization from a bankruptcy court to serve subpoenas on financial information may be overly burdensome by encompassing Peregrine's affiliates and wholly owned subsidiaries, in addition to the brokerage itself.JPMorgan reserved the right to "modify or quash" subpoenas that are too burdensome or broad.Bodenstein last week asked the court for the authority to require 10 financial institutions, including JPMorgan, to produce information about open and closed accounts maintained by Peregrine, its affiliates and subsidiaries.
What is the "legal" basis that JPM demands to be let off the subpoena hook?
and.......Bodenstein said in an interview on Monday that his request to serve subpoenas was "pretty standard," and JPMorgan said in the filing that it did not object to the court granting him the general authority to issue subpoenas upon the bank.However, JPMorgan said the "conditions upon which the trustee seeks to conduct the proposed examination are anything but 'routine.'"JPMorgan also objected to Bodenstein's request that the bankruptcy court prohibit subpoenaed financial institutions from recouping any costs incurred with providing documents.
Because obviously JPM is pennypinching like a modest regional bank now that it no longer is able to mismark hundreds of billions in CDS (which no longer have the implied backstop of the Fed).
As for why JPM is suddenly hiding behind a quash order, we doubt this needs any particular clarification: after all Jamie Dimon is sick and tired of pretending to be questioned by his part-time employees in Congress and Senate. Another MF Global-like spectacle may be good for politician and C-SPAN ratings, but will hardly delight JPM's shareholders.
http://www.guardian.co.uk/business/2012/aug/06/standard-chartered-iran-transactions?CMP=twt_fd
Standard Chartered Bank accused of scheming with Iran to hide transactions
British bank named in scathing report by regulators which claims SCB helped Iranian clients skirt US financial sanctions
The attack on Standard Chartered is a severe blow to the bank's reputation. Photograph: Philippe Lopez/AFP/Getty Images
Standard Chartered Bank ran a rogue unit that that schemed with Iran's government to hide more than $250bn (£160bn) in illegal transactions for nearly a decade, according to a scathing report by New York regulators.
According to the report filed by the New York state department of financial services (NYSDFS), when challenged a US colleague, a Standard Chartered executive caustically replied: "You fucking Americans. Who are you to tell us, the rest of the world, that we're not going to deal with Iranians."
About 60,000 transactions were involved and the bank was "apparently aided" by its consultant Deloitte & Touche in hiding details from regulators.
The bank could lose its license to trade in New York, a potentially devastating blow, and has been summoned to a meeting with the regulator on 15 August to answer the allegations.
Shares in the London-listed bank dropped sharply in the final seconds of trading when the report was published just as London's stock market was closing. The shares had been higher before they slumped 6% to £14.70 to the biggest faller in the FTSE 100.
The attack on Standard Chartered – accused of "willful and egregious violations of law" – is a severe blow to the reputation of the bank, which until last night had been regarded as the most solid of any of the London-listed banks after the 2008 taxpayer bailouts, the more recent Libor rigging scandal at Barclays, and the money laundering offences at HSBC.
Its top management team – chief executive Peter Sands and finance director Richard Meddings – have been held in such regard that only last week they were fending off questions about their potential candidacies for governor of the Bank of England or joining Barclays in the wake of the Libor scandal. Meddings, who has been with the bank since 2002, was promoted to finance director in November 2006 when Sands became chief executive. Lord Turner, current head of the Financial Services Authority, sat on the board for two years starting in 2006. Former British prime minister John Major began his career at the bank.
The 27-page report claims Standard Chartered bankers helped Iranian clients skirt US financial sanctions against their country for close to a decade.
Benjamin Lawsky, superintendent of the NYSDFS, said a Standard Chartered subsidiary in New York had also sought to do business with other US sanctioned countries including Libya, Burma and Sudan.
It is the latest blow to the reputation of the City, already under fire in Washington following the HSBC money-laundering debacle and JP Morgan's multibillion-dollar trading losses at its London office. "It seems to be that every big trading disaster happens in London," New York congresswoman Carolyn Maloney told a Congressional panel investigating the JP Morgan fiasco in June.
The New York regulator has provided emails between members of staff. In one the head of the US operations warns, among others, the executive director of risk in London, that the dealings with Iran could cause "very serious or even catastrophic reputational damage" to the group. The email, dated October 2006, warned "there is equally importantly potential of risk of subjecting management in US and London (eg you and I) and elsewhere to personal reputational damages and/or serious criminal liability." It was this memo that provoked the response about "you fucking Americans".
Financial transactions with Iran have been subject to US sanctions since 1979. Limited, highly scrutinised transactions known as "U-turns" were allowed as long as the money ends up in non-Iranian banks.
In 2008 the US treasury revoked authorisation for U-Turn transactions because it suspected Iran was using its banks to finance its nuclear weapons and missile programmes and to finance terrorist groups, including Hezbollah and Hamas.
According to Lawsky, Standard Chartered set up an operation known as "Project Gazelle" aimed at helping Iranian banks put money through the US financial system.
According to the report:
For almost 10 years, SCB [Standard Chartered Bank] schemed with the government of Iran and hid from regulators roughly 60,000 secret transactions, involving at least $250bn, and reaping SCB hundreds of millions of dollars in fees. SCB'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 … In short, SCB operated as a rogue institution.
In one example from 2001 detailed in the report Standard Chartered was approached by Iran's CBI/Markazi, Iran's central bank, to act as recipient for daily oil sales from the National Iranian Oil Company.
Iranians warned the bank that disclosure of their identities to US banks would cause "unacceptable delays in clearing funds," according to the report.
The bank took legal advice and was told it "should ascertain that the payments are authorized". Instead it "conspired with Iranian clients to transmit misinformation to the New York branch by removing and otherwise misrepresenting wire transfer data that could identify Iranian parties," the report claims.
Standard Chartered was unprepared for the scale of the criticism, despite having made disclosures in previous annual reports – and in its interim report last week – about discussions with the US over breaking sanctions. It would only repeat this yesterday, saying: "As reported previously, the Group is conducting a review of its historical US sanctions compliance and is discussing that review with US enforcement agencies and regulators. The group cannot predict when this review and these discussions will be completed or what the outcome will be".
a search for " proper " ( non US banks ) villans in an election year , another example of the not so " special " relationship between the US and UK ..... wonder when we see the UK hoist up JPM or GS for similar conduct ?
9:58PM BST 06 Aug 2012
New York’s top financial regulator has claimed that “flagrantly deceptive actions” by the British bank left the US “vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes”.
In a devastating 27-page order Benjamin Lawsky, superintendent of the New York State Department of Financial Services, claims that Standard Chartered Bank (SCB) “operated as a rogue institution” – and that the bank’s group directors in London were complicit.
In October 2006, the head of the bank’s American operations “sent a panicked message to the group executive director in London” saying that the bank’s handling of Iranian clients could cause “catastrophic reputational damage”. The unnamed director allegedly replied: “You f****** Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians.”
The order, which last night triggered a 6pc drop in Standard Chartered’s share price in the minutes left before the markets closed, claims: “Motivated by greed, SCB acted for at least 10 years without any regard for the legal, reputational, and national security consequences of its flagrantly deceptive actions.
Lord Davies, the former Labour minister, was chief executive of Standard Chartered between 2001 and 2006. The current chief executive, Peter Sands, was promoted to the top job from finance director in November 2006. Mr Sands, one of Britain’s most respected bankers, was credited with masterminding the “Balti bail-out” that shored up the financial system at the apex of the crisis in 2008.
