A banking regulator in New York state has said that a rogue Standard Chartered Plc banking unit violated US anti-money laundering laws by scheming with Iran to hide more than $250bn of transactions, and may lose its licence to operate in the US state.
Benjamin Lawsky, superintendent of New York state's department of financial services, said Standard Chartered Bank reaped hundreds of millions of dollars of fees by scheming with Iran's government despite US economic sanctions to hide roughly 60,000 transactions from 2001 to 2010.
Lawsky's order quotes a senior Standard Chartered official in London who, upon being advised by a North American colleague that its Iran dealings could cause "catastrophic reputational damage", reportedly 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."
Lawsky said the unit of the London-based bank was "apparently aided" by its consultant Deloitte & Touche LLP, which hid details from regulators, and despite being under supervision by the Federal Reserve Bank of New York and other regulators for other compliance failures.
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", Lawsky said in an order made public on Monday.
"In short, Standard Chartered Bank operated as a rogue institution," Lawsky said.
A Standard Chartered spokesman said the bank "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".
It was unclear whether other companies are being targeted in the inquiry.
Lawsky said he is also investigating "apparently similar" schemes to conduct business with other countries subject to US sanctions, including Libya, Myanmar and Sudan.
Deloitte, Lawsky and the New York Fed did not immediately respond to requests for comment. The Iranian embassy in Washington DC was not immediately available for comment.
A US justice department spokeswoman declined to comment on whether that agency is conducting its own probe.
Transfer of dollars
The charges are the latest by US law enforcement that highlight how banks might have systematically moved US dollars
through sanctioned countries despite a federal crackdown.
New York banking licences let foreign banks operate a hub to handle transactions in US dollars, the world's most widely used currency. Without that hub, a bank would lose access to the dollar markets.
Removal of a US banking licence could be unprecedented, and the threat of losing it could force Standard Chartered into at least paying a large fine and adopting compliance reforms.
Lawsky said Standard Chartered moved money through its New York branch on behalf of Iranian financial clients, including the Central Bank of Iran and state-owned Bank Saderat and Bank Melli, which were subject to US sanctions.
At the centre were the alleged "U-Turn" transactions; money moved for Iranian clients among banks in the UK and Middle East and cleared through Standard Chartered's New York branch, but which neither started nor ended in Iran.
Such transactions were permissible until November 2008, when the treasury department prohibited them on concerns that they were being used to evade sanctions, and that Iran was using banks to fund nuclear and missile development programs.
The order contended that Standard Chartered found ways to circumvent the rules, such as by altering message fields and inserting phrases such as "NO NAME GIVEN" to hide the nature of the transactions.
Standard Chartered's New York branch held $40.8bn of assets as of March 31, Lawsky said.
Standard Chartered as of June 2011 was one of only 10 foreign-owned institutions with "direct bidder" access to US government debt auctions through a computerised system.