Standard Chartered denies claims it is a "rogue institution"

7 August 2012

Standard Chartered shares took a hit on Tuesday as investors in Hong Kong were spooked, despite the bank denying allegations that it illegally "schemed" with Iran to launder money.

The UK-based bank's shares fell in Hong Kong before plunging in London, where it lost almost 18% on the opening bell.

Investors sold after US regulators claimed Standard Chartered laundered as much as $250 billion (£161 billion) over nearly a decade.

The New York State Department of Financial Services (DFS) says the bank hid 60,000 transactions for "Iranian financial institutions" despite US economic sanctions.

The bank has issued a statement denying the allegations. It claims the DFS has not presented a full and accurate picture of the facts.

It says that in January 2010, it voluntarily approached all relevant US agencies, including the DFS, and informed them that it had initiated a review of transactions relating to Iran in the period 2001-2007.

Standard Chartered states that "well over 99.9% of the transactions relating to Iran complied with the U-turn regulations. The total value of transactions which did not follow the U-turn was under $14 million."

However, the drama looks set to unfold further.

The regulator says that its nine-month investigation found instruction manuals designed to help senior staff obscure the Iranian transactions. It says numerous emails going back as far as 1995 showed how the bank's lawyers advised on ways to go about circumventing US sanctions.

"Standard Chartered's actions left the US financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes, and deprived law enforcement investigators of crucial information used to track all manner of criminal activity," it says.

US regulators also claim to have found evidence that the bank had similar schemes for other countries under sanctions including Libya, Burma and Sudan, but say investigation of these matters is ongoing.

Standard Chartered is the sixth bank since 2008 to be implicated in dealings with sanctioned countries such as Iran in investigations led by federal and New York law enforcement officials.

Four banks - Barclays, Lloyds, Credit Suisse Group and ING Bank - have agreed to fines and settlements totalling $1.8 billion.

Last month, HSBC set aside £700 million to address money laundering penalties. If the extent of Standard Chartered's involvement is as widespread as the DFS claims then it will be facing considerable costs.

In a worst case scenario, the loss of a New York banking licence would be a devastating blow for Standard Chartered which processes $190 billion every day for global clients, the US bank regulator says.

This was written for our sister website, Interactive Investor.

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