London Standard Chartered Bank Accused of Laundering $250 Billion of Iranian Money
(Note: this post isn’t about whether or not Iranian sanctions should be in place or not; it’s about politics. I’d also like to say that I’d never even heard of the concept ‘clearing dollars’ before yesterday.)
Two days ago Benjamin M. Lawsky, the New York Superintendent of Financial Services filed an order against London multinational giant Standard Chartered Bank. The order accuses the bank of some pretty damning activities, the nature of which caused the bank’s shares to drop 24% in value almost overnight:
“For nearly a decade, SCB programmatically engaged in deceptive and fraudulent misconduct in order to move at least $250 billion through its New York branch on behalf of client Iranian financial institutions (“Iranian Clients”) that were subject to U.S. economic sanctions, and then covered up its transgressions. These institutions included no less than the Central Bank of Iran/Markazi (“CBI/Markazi”), as well as Bank Saderat and Bank Melli, both of which are also Iranian State-owned institutions. (a footnote adds that the bank’s transactions with other sanctioned nations , such as Libya, Myanmar and Sudan are still under investigation.)
The order further accuses the bank of: falsifying business records; offering false instruments for filing; failing to maintain accurate books and records of all transactions effected and all actions taken on behalf of SCB; obstructing governmental administration; failing to report misconduct to the Department in a timely manner; evading Federal sanctions; and numerous other violations of law. As evidence of the massive cover up, the DFS says:
“Specifically, SCB ensured the anonymity of Iranian U.S. dollar clearing activities through SCB?s New York branch by falsifying SWIFT wire payment directions. When SCB employees determined that it was necessary to “repair” unadulterated payment directives,4 they did so by stripping the message of unwanted data, replacing it with false entries or by returning the payment message to the Iranian Client for wire stripping and resubmission. Thus, SCB developed various ploys that were all designed to generate a new payment message for the New York branch that was devoid of any reference to Iranian Clients.”
The blue defense they’re speaking about: “Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians?” a bank superior in London said, according to the order.
SCB apparently wonders why now? (As do we.) The bank’s been under investigation for two years; what …er…convenient timing, no? The Telegraph says it best:
“With the US presidential election looming, the threat posed by Iran is central to the debate as President Barack Obama and Republican challenger Mitt Romney vye to display their credentials on national security.
A bank serving as a money launderer for Iran, you couldn’t make up a Frankenstein monster designed to scare the US public more,” says John Coffee, a professor of securities law at Columbia University in New York.”
So let’s unleash those (one) federal regulators, okay? There’s an election to win! Drum roll…..Will Standard Chartered lose its license? Will there be criminal charges? But as far as electoral magic for Obama, would it be just Lawsky’s department? Does that matter at all? So far it’s not the DoJ, NY Fed, FBI, though there are reports that they’re on the case as well…
Further muddying the issue, according to Bloomberg, a Treasury Department OFAC spokesman said that the New York intermediary through which the transaction went through did not have to be notified by the British bank that it was carrying out this transaction on behalf of an Iranian entity in order to meet the requirements of this regulation. Wot?
“Lawsky’s decision to move forward alone is unusual, said Jimmy Gurule, a former Treasury Department undersecretary for enforcement who now teaches at the University of Notre Dame in South Bend, Indiana. “In the past six to seven cases involving institutions violating U.S. sanctions, this is the only one where a regulator acted unilaterally,” he said.”
“Lawsky was willing to break ranks with national regulators on the Standard Chartered probe, including the U.S. Treasury Department’s Office of Foreign Assets Control, because of e- mails that surfaced in the investigation, said the person familiar with the case.” [snip]
The Treasury Department’s defense of Standard Chartered’s conduct puzzled Gurule. “You’d think the federal government would be defending national security interests first,” he said. “It appears to be the state that’s taking the lead to protect the nation’s broader interests.”
Here’s the good news according to the financial sector; may you find some measure of cheer in it, as well:
This morning Bloomberg is reporting than SC’s shares may be bouncing back a bit. Why you ask? Because it’s been leaked that:
“Standard Chartered Plc might be asked to pay as much as $700 million to resolve money-laundering allegations filed by New York’s banking superintendent after his department grew impatient with inaction by federal regulators, a person familiar with the case said.”
It’s important that regulators are seen as having no favorites, isn’t it? Slaps on the wrist need to be dispensed equally, and with equal…strength; it’s the American Way (not to mention, if that’s the outcome, if there will be immunity from criminal charges in the deal:
“Other foreign banks that have resolved allegations of executing wire transfers on behalf of sanctioned nations or groups include Barclays Plc (BARC), Credit Suisse Group AG (CSGN), Lloyds Banking Group Plc and ABN AMRO Group NV. In each of these cases, the settlements involved joint investigations by regulators.”
And thus…is our faith in the system restored. Please remember that even if the ‘rogue’ bank’s New York license is pulled…it will open further opportunities to my personal heart throb, Jamie Dimon, and perhaps…even others.
How many other banks are breaking US Iranian sanctions? How many arms manufacturers? And might we ask:
(cross-posted at kgblogz.com)