Published December 10, 2012
WASHINGTON – Standard Chartered Plc agreed to pay $327 million to U.S. authorities to resolve allegations that it violated U.S. sanctions laws, capping months of legal headaches for the British bank.
The U.S. Justice Department and the New York District Attorney's office on Monday said the bank moved millions of dollars through the U.S. financial system in violation of sanctions laws, most of it on behalf of customers in Iran and Sudan.
The fine was on top of a separate payment of $340 million made in August by Standard Chartered to New York's state banking regulator over Iranian sanctions.
Taken together, the two penalties could almost wipe out the bank's profit growth this year. Nevertheless, its shares nudged higher after Monday's announcement, which was in line with guidance by the bank last week.
Standard Chartered said in a statement the settlement followed nearly three years of "intensive cooperation with regulators and prosecutors."
The scandal erupted in early August, when New York banking Superintendent Benjamin Lawsky said Standard Chartered was a "rogue institution" that had shown "obvious contempt" for banking regulations, leaving the United States vulnerable to terrorists, weapons dealers and corrupt regimes.
At the time, Lawsky accused the bank of hiding certain information on $250 billion worth of transactions involving Iran and threatened to revoke its state banking license.
In its statement on Monday, Standard Chartered noted that the U.S. Treasury Department found only about $24 million of transactions on behalf of Iranian parties and $109 million on behalf of parties in Burma, Sudan and Libya appeared to violate U.S. sanctions laws.
Asked about the two separate penalties on Standard Chartered, one by Lawsky and another by the Justice Department and other agencies, a top official said the Justice Department probe was based on federal law.
"We really did look at it from the violation of federal law," Lanny Breuer, the chief of the Justice Department's criminal division, said in an interview. "We recognize that we have state partners and other partners out there who have to look at these violations from a different prism."
Standard Chartered's shares, which crashed 30 percent immediately after Lawsky's action in August, wiping some $17 billion off its market value, have clawed back most of that fall, but are still 4 percent below their level before the news.
"Hopefully this now draws a line under the issue," said Gary Greenwood, analyst at Shore Capital in Britain. "There's been no obvious damage to the franchise as a result of this."
As part of the agreement announced on Monday, the Justice Department and the New York District Attorney both agreed to defer charges against the bank, and drop the charges if the bank improves its sanctions compliance and forfeits $227 million.
The bank entered into a separate $100 million agreement with the U.S. Federal Reserve to resolve allegations that the bank provided "inadequate and incomplete responses" to bank examiners and provided insufficient oversight of its sanctions compliance program.
Adam Kaufmann, the chief of investigations for the Manhattan District Attorney's office, said the $227 million criminal forfeiture did not take into account the $340 million Standard Chartered paid Lawsky's agency.
"We treated this bank in a manner consistent with and proportional to all the other banks," Kaufmann said.
In similar settlements over sanctions violations, Lloyds TSB Bank Plc has forfeited $350 million, Credit Suisse AG $536 million, Barclays $298 million and ING Bank NV $619 million.
"These cases give teeth to sanctions enforcement, send a strong message about the need for transparency in international banking, and ultimately contribute to the fight against money laundering and terror financing," Manhattan District Attorney Cyrus Vance said.
The U.S. Treasury Department also entered into a settlement to resolve allegations that the bank's London and Dubai offices violated U.S. sanctions against the four countries at issue.
The Treasury Department said it levied a $132 million penalty but deemed that satisfied by the bank's payment to the Justice Department.
(Reporting by Aruna Viswanatha in Washington; Additional reporting by Karen Freifeld in New York and Steve Slater in London; Editing by Eddie Evans and Andrew Hay)