Standard Chartered Questions New York Action

US RULES “UNCLEAR”

The loss of a New York banking license would be a devastating blow for a foreign bank, effectively cutting off direct access to the U.S. bank market.

Lawsky said Standard Chartered processes $190 billion every day for global clients.

The United States imposed economic sanctions on Iran in 1979. Until November 2008 U.S. banks could process some transactions for Iranian banks or individuals provided they were initiated offshore by non-Iranian foreign banks and were on the way to other non-Iranian foreign banks. Such transactions were known as “U-turns.”

David Proctor, who worked for Standard Chartered from 1999 until 2006 and who oversaw the Iran business briefly in 2006 when he was CEO in the United Arab Emirates, said the rules on dealing with Iran were unclear.
“At the time (May 2006), … the key question was to try and understand exactly what counted as a U-turn transaction,” he said.

Proctor, who now provides advice for banks with BAS Consulting in Singapore, added that Standard Chartered now has to help clear up what actually happened. “Banks these days don’t have a choice,” he said. “You have to be transparent.”

Standard Chartered put the value of Iran-related transactions that did not comply with regulations at less than $14 million, contrasting sharply with the New York regulator’s estimate of $250 billion.

It also called Lawsky’s interpretation of the U-turn exemption “incorrect as a matter of law.” Standard Chartered must appear before the Department of Financial Services on Aug. 15.

SIX BANKS

Standard Chartered is the sixth non-U.S. bank implicated since 2008 over alleged dealings with sanctioned countries.

Barclays Plc, Lloyds Banking Group Plc, Credit Suisse and ING Bank NV have agreed to fines and settlements totaling $1.8 billion, while regulatory filings show that HSBC Holdings Plc is under investigation.