Standard Chartered settles N.Y. Iran probe as inquiries loom

Formal Agreement

Standard Chartered said in a statement yesterday that “a formal agreement containing the detailed terms of the settlement is expected to be concluded shortly.” It “continues to engage constructively with the other relevant U.S. authorities,” the bank said.

London-based Standard Chartered generates almost 90 percent of its profit and revenue in Asia, Africa and the Middle East. The bank’s shares climbed 4.7 percent to 1,434.5 pence at 12:45 p.m. in London.

The settlement brings to an end a week-long showdown between Lawsky, 42, New York’s top banking regulator, and Standard Chartered Chief Executive Officer Peter Sands, 50.

Lawsky’s order last week caught the bank’s management team by surprise. Lawsky alleged that Standard Chartered was a “rogue bank” that had executed 60,000 dollar-based wire transactions for Iranian clients from 2001 to 2007.

Effort to Conceal

Standard Chartered’s apparent effort to conceal the identity of its Iranian counterparties violated the terms of a 2004 settlement between it and the state of New York, in which the U.K. bank pledged “to ensure compliance with all record- keeping and reporting requirements,” according to the order.

Even before 2001, the order stated, the bank’s general counsel “embraced a framework for regulatory evasion” by keeping its New York branch in the dark about Iran transactions.

The bank allegedly accomplished this goal by stripping out the name of Iranian clients so as not to slow down transfers that might have to be reviewed for compliance with U.S. economic sanctions. Those restrictions allowed some transactions but not others as long as non-Iranian banks were involved on both ends.

In addition to evading federal controls, Standard Chartered covered up its plan to grab market share in the Iranian funds market by falsifying business records, making false statements, maintaining inaccurate books, obstructing oversight and failing to report misconduct promptly, according to Lawsky’s order.

Formal Action

Between 2004 and 2007, Standard Chartered was subject to formal action over other regulatory compliance failures related to the Bank Secrecy Act, anti-money laundering policies and procedures and regulations of the U.S. Office of Foreign Assets Control, the main overseer of Iran transactions.

In a 2004 agreement with regulators, the bank promised to monitor and improve money-laundering controls.

The restrictions of the agreement were lifted in 2007 because the bank provided a “watered-down” report of compliance, according to Lawsky’s order. Bank statements “misled” the department into lifting the restrictions of the 2004 agreement, the order stated.

The order cited bank e-mails and other internal documents to support its accusations.

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