US charges StanChart of $250 billion secret Iran deals; deficient India work
MDT/PTI 07 August 2012

The New York State Department said for almost ten years, StanChart schemed with Iran and hid from regulators roughly 60,000 secret transactions, involving at least $250 billion, and reaping the Bank hundreds of millions of dollars in fees

New York: Standard Chartered Bank (StanChart) has came under the scanner in the US for $250 billion worth secret transactions with Iran and for deficient money laundering controls in outsourcing of work to India -- thus exposing the US financial system to terror financing and other risks, reports PTI.
"For almost ten years, Standard Chartered Bank 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 New York State Department of Financial Services said in an order against the UK-based global banking giant.
"SCB'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." 
As per the 27-page order, SCB had assured the New York state in May 2010 that it would take immediate steps to comply with the US Office of Foreign Assets Control (OFAC) sanctions.
However, another regulatory examination in 2011 found continuing and significant Anti Money Laundering failures.
Among these, the bank was outsourcing its "entire OFAC compliance process for the New York branch to Chennai, India, with no evidence of any oversight or communication between the Chennai and the New York offices." 
The OFAC is the designated US government agency for preparing list of entities with whom US citizens and entities are barred from doing any business.
The order against Stanchart comes close on the heel of the US Senate's Permanent Committee on Investigations report on 17th July charging another UK-based global bank HSBC of exposing the US financial system to terrorist financing and money laundering risks.
HSBC's staff in India had also come under the scanner for deficiencies in their role as "offshore reviewers" of the global banking giant's compliance to safety mechanism against money laundering and terrorist financing. 
Noting that SCB acted as a "rogue institution" the New York State said that its investigations are ongoing into the bank's dealings with other US-sanctioned countries, such as Libya, Myanmar and Sudan.
The probe also found SCB's consultant Deloitte & Touche LLP, of intentionally omitting critical information about the bank in its "independent report" to regulators.
In the HSBC case, the Senate sub-committee probe found that HSBC's anti-money laundering (AML) Compliance Department, which included employees in India, was highly inadequately staffed and deficiencies were found in the quality of the work done by HSBC's "offshore reviewers in India", who were used for clearing a major backlog of suspected transaction alerts at the bank.
The New York State Financial Services Department said its order against StanChart follows an "extensive investigation (that) included the review of more than 30,000 pages of documents, including internal SCB e-mails that describe wilful and egregious violations of law." 
In its order, the State has directed SCB to appear and explain apparent violations of law, demonstrate why its licence to operate in New York should not be revoked, and "pay for an independent, on-premises monitor of the Department's selection to ensure compliance with rules governing the international transfer of funds".
The bank's clients included Central Bank of Iran/Markazi, as well as Bank Saderat and Bank Melli, both of which are Iranian State-owned institutions.
The order said that "in its evident zeal to make hundreds of millions of dollars at almost any cost", SCB falsified business records, failed to maintain accurate books and records, obstructed governmental administration, failed to report misconduct to the Department in a timely manner and evaded Federal sanctions, among other violations.
From January 2001 through 2007, SCB conspired with its Iranian Clients to route nearly 60,000 different US dollar payments through SCB's New York branch after first stripping information from wire transfer messages used to identify sanctioned countries, individuals and entities.
The order said that 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 Iranian clients that were subject to US economic sanctions, and then covered up its transgressions." 
SCB also "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." 
According to SCB’s independent consultant, there were about 30,000 messages that were sent to SCB's New York branch by its London office, mainly on behalf of state-owned Iranian banks, and approximately 30,000 messages from SCB's branch in Dubai, United Arab Emirates, to New York branch on behalf of Iranian-owned banks, corporations and other unknown entities.
The misconduct was "especially egregious" because during a key period between 2004 and 2007 SCB's New York branch was subject to a formal supervisory action by the Department and the Federal Reserve Bank of New York for other regulatory compliance failures involving the Bank Secrecy Act, anti-money laundering policies and procedures, and OFAC regulations.
Headquartered in London and with over 1,700 offices in 70 markets globally, SCB is a leading international banking institution and its clients include some of the largest corporations and financial institutions in the world.
In 2011, it generated $17.6 billion in income and roughly $5 billion in profits, greater than at any other time in the bank's 150-year history. 
Through OFAC, the US Government administers and enforces sanctions against regimes that fund terror outfits, weapon dealers, drug traffickers and other hostile enterprises.
Foreign governments currently subject to OFAC sanctions include Iran, North Korea and the Sudan.
In early 2009, after being contacted by certain law enforcement authorities, SCB had conducted an internal investigation into its OFAC procedures.
"Motivated by greed, SCB acted for at least ten years without any regard for the legal, reputational, and national security consequences of its flagrantly deceptive actions.
"Led by its most senior management, SCB designed and implemented an elaborate scheme by which to use its New York branch as a front for prohibited dealings with Iran dealings that indisputably helped sustain a global threat to peace and stability. By definition, any banking institution that engages in such conduct is unsafe and unsound," the order said.
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