As a result, the New York State banking regulator said the bank’s license may be canceled, effectively booting it off Wall Street.
Benjamin Lawsky, superintendent of the New York State Department of Financial Services, said Standard Chartered Bank reaped hundreds of millions of dollars of profits from 2001 to 2010.
Lawsky’s order quotes a senior Standard Chartered official in London who, upon being advised by a North American colleague that its Iran dealings could cause “catastrophic reputational damage,” reportedly said:
“You f—ing Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians?” That quote alone might make the bank anathema to American businessmen.
The New York State report said: “For almost ten years, SCB schemed with the Government of Iran and hid from regulators roughly 60,000 secret transactions, involving at least $250 billion, and reaping SCB hundreds of millions of dollars in fees.”
The transactions mainly involved handling US dollar transfers for major state-owned Iranian banks, including the country’s Central Bank, that fell under strict US government controls aimed at blocking finance for Tehran’s alleged nuclear weapons program.
The regulator said Standard Chartered falsified records of the transactions and obstructed oversight “in its evident zeal to make hundreds of millions of dollars at almost any cost.”
The transactions “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 said.
The department said its investigation also had revealed evidence of possible illegal transactions with Libya, Myanmar and Sudan while those countries were under US sanctions.
Standard Chartered responded that it was being maligned in the report. It said 99.9 percent of its transactions with Iran complied with US Treasury rules and that only $14 million was not in compliance.
The bank said it was shocked at the New York State allegations as it had informed federal agencies in 2010 that it was conducting an internal probe into possible violations. It also said that it had voluntarily stopped taking any new clients in Iran more than five years ago.
The accusations came weeks after a US Senate report accused HSBC, also based in London, of concealing more than $16 billion in transactions with Iran and Mexican drug lords from 2001 to 2007.
Last week HSBC, one of the world’s top five banks by asset size, set aside $700 million to cover possible fines related to the transactions and warned the overall cost could be “significantly higher.”
The charges are the latest by US law enforcement that highlight how banks might have systematically moved US dollars through sanctioned countries despite a federal crackdown.
New York banking licenses let foreign banks operate a hub in Manhattan to handle transactions in US dollars, the world’s most widely-used currency. Without that hub, a bank would lose access to the dollar markets.
Removal of a US banking license could be unprecedented, and the threat of losing it could force Standard Chartered into at least paying a large fine and adopting compliance reforms.
The order contended that Standard Chartered used a simple method known as “stripping,” in which all references to Iran were stripped from financial documents and transactions appeared to be conducted on behalf of Standard Chartered itself.