Big 'laundering' fine looms for SCB

Standard Chartered Plc has agreed to a New York Department of Financial Services demand that the bank hire an outside monitor to ensure compliance with the United States anti-money laundering laws, according to a person familiar with the matter.

The agreement on the monitor, mandated by the regulator in an Aug 6 order, stems from negotiations between the bank and state officials ahead of an Aug 15 hearing at which Standard Chartered will be asked to explain why its license to do business in New York shouldn't be revoked.

New York banking Superintendant Benjamin Lawsky alleged London-based Standard Chartered flouted US banking laws as part of a decade-long deception, helping launder about $250 billion in Iranian funds in contravention of US statutes and without proper disclosure. Lawsky is said to seek as much as $700 million to settle the investigation, another person familiar with the case said.

The regulator's threat panicked the bank's investors, sent its share price down about 16 percent the day after and provoked a defiant response from Standard Chartered Chief Executive Officer Peter Sands, who said the vast majority of wire transfers identified by Lawsky complied with federal law. The bank's stock is down about 10 percent for the week.

According to the terms of the order, the state regulator will select the monitor, and the bank will pay for it and provide access to all compliance and transaction records.

The loss of Standard Charter's New York license would significantly damage the bank's corporate banking model and could result in a 40 percent drop in earnings, said Chirantan Barua, an analyst at Sanford Bernstein Research in London.

Standard Chartered fell 2.7 percent on Friday to 1,326.50 pence in London trading. The bank, which had $17.6 billion in income and $5 billion in profit last year, has $40.8 billion in assets associated with its New York branch, according to Lawsky's order.

Jonathan Gandal, a spokesman for Deloitte, said in an e-mailed statement: "Deloitte FAS had no knowledge of any alleged misconduct by any Standard Chartered Bank employees and categorically denies that it aided in any way any violation of law by the bank."

"Deloitte FAS absolutely did not delete 'any reference to certain types of payments' from its final written report," Gandal said in his statement. "Deloitte FAS did not include in its final written report a particular recommendation which was included in an earlier draft."

(China Daily 08/13/2012 page14)