In a rare move, New York’s top bank regulator threatened to strip the state banking licence of Standard Chartered Plc, saying it was a “rogue institution” that hid $250 billion in transactions tied to Iran, in violation of US law.
The New York State Department of Financial Services (DFS) on Monday said the British bank “schemed” with the Iranian government and hid from law-enforcement officials some 60,000 secret transactions to generate hundreds of millions of dollars in fees over nearly 10 years.
At the same time, it exposed the US banking system to terrorists, drug traffickers and corrupt states, the department said.
The loss of a New York banking license would be a devastating blow for a foreign bank, effectively cutting off direct access to the US bank market. Standard Chartered processes $190 billion every day for global clients, the New York bank regulator said.
In an unusual look inside a bank, the regulator described how Standard Chartered officials debated whether to continue Iranian dealings. In October 2006, the top official for business in the Americas, whom the regulator did not name, warned in a “panicked message” that the Iranian dealings could cause “catastrophic reputational damage” and “serious criminal liability.”
A top executive in London shot back: “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 reply showed “obvious contempt for US banking regulations,” the regulator said.
Standard Chartered is the third British bank to be ensnared in US law-enforcement probes this summer. Barclays Plc agreed to pay $453 million to settle US and UK probes that it rigged a global benchmark in June. A month later, a US Senate panel issued a scathing report that criticized HSBC Holding Plc’s efforts to police suspect transactions, including Mexican drug traffickers.
In a statement Standard Chartered said the bank “does not believe the order issued by the DFS presents a full and accurate picture of the facts.”
The bank said it shared with US agencies an analysis that demonstrated it “acted to comply, and overwhelmingly did comply” with US regulations. Standard Chartered put the total value of Iran-related transactions that did not follow regulations at under $14 million.
“The group was therefore surprised to receive the order from the DFS, given that discussions with the agencies were ongoing,” Standard Chartered said. “We intend to discuss these matters with the DFS and to contest their position.”
DFS declined further comment.
The Iranian Embassy in Washington was not immediately available to comment. The Treasury Office of Foreign Assets Control, which enforces US economic and trade sanctions against targeted countries, declined to comment.