Standard Chartered fined $300m by US financial watchdog

Further penalty imposed for failing to tackle compliance problems following $340m fine in 2012 over money-laundering scandal

theguardian.com, Dominic Rushe in New York, Wednesday 20 August 2014

Standard Chartered have been fined $300m for lapses in its compliance

after the Iran money-laundering scandal. Photograph: Kevin Lam/Reuters

Standard Chartered has agreed to pay $300m over lapses in its anti-money-laundering procedures, the New York State Department of Financial Services (DFS) has announced.

The settlement comes almost exactly two years after the British bank paid a $340m fine to the DFS after it was accused of scheming with Iran to hide from US authorities billions of pounds worth of transactions.

The latest payment follows the bank's failure to tackle problems with its anti-money laundering compliance that the New York regulator required following the 2012 settlement.

"If a bank fails to live up to its commitments, there should be consequences. That is particularly true in an area as serious as anti-money-laundering compliance, which is vital to helping prevent terrorism and vile human rights abuses," said Benjamin Lawsky, superintendent of the DFS.

Lawsky alleged the British lender failed to catch millions of higher-risk transactions that should have triggered further investigation. He said "a significant amount" of the potentially high-risk transactions the bank failed to detect originated from its Hong Kong subsidiary (SCB Hong Kong) and branches in the United Arab Emirates (SCB UAE), among others.

As well as the monetary penalty the bank agreed to keep on for a further two years an independent compliance monitor appointed by the regulator and to make enhancements to the transaction surveillance system at its New York branch. It will also suspend dollar clearing operations for high-risk retail business clients of SCB Hong Kong and start abandoning high-risk small and medium business clients at SCB UAE.

The New York branch will not, without the prior approval of the DFS, open a US dollar demand deposit account for any customer who does not already have such an account there.

Standard Chartered settled with Lawsky in 2012 after he released a scathing report that accused a unit of the bank of leaving the American financial system susceptible to terrorists and "drug kingpins". The $340m fine was part of a $667m settlement with other regulators over breaches of US sanctions on Iran.

Lawsky had accused the bank of helping Iran launder about $250bn, keeping false records and handling lucrative wire transfers for Iranian clients.

The report found that one Standard Chartered executive caustically dismissed concerns from a US colleague about dealings with Iran, one of a number of countries under American sanction.

"You fucking Americans. Who are you to tell us, the rest of the world, that we're not going to deal with Iranians," Lawsky's report quoted the banker as saying.

That fine was a particular embarrassment for Standard Chartered – which is based in London but best known for its banking services in Asia and Africa – as its management had weeks earlier emphasised that it had a more conservative, "boring" culture than some rivals.

The bank strongly rejected Lawsky's portrayal of its activities, which sent its share price and management into a tailspin. In August 2012, chief executive Peter Sands agreed to settle the charges while insisting that the bank had committed only minor breaches of the rules.

Announcing quarterly results this month, the bank warned it faced further US fines, saying Lawsky had uncovered "certain issues" with its efforts to block money laundering following the 2012 agreement.

The alleged lapse in anti-money laundering controls was detected by Ellen Zimiles, the independent monitor installed as part of the 2012 settlement. According to the DFS the bank's New York office had developed a transaction monitoring system, the SCB Rulebook, designed to alert the New York branch to unusual transaction patterns that would require further investigation.

But when Zimiles, an authority on anti-money laundering programmes at Navigant Consulting, gathered information and attempted to test the SCB Rulebook she found it contained numerous errors and other problems.

As a result, said the DFS, SCB failed to identify high-risk transactions for further review. "SCB failed to detect these problems because of a lack of adequate testing both before and after implementation of the transaction monitoring system, and failed to adequately audit the transaction monitoring system."

In a statement the bank said it "accepts responsibility for and regrets the deficiencies in the anti-money laundering transaction surveillance system at its New York branch. The group has already begun extensive remediation efforts and is committed to completing these with utmost urgency."