Alleged violations of US anti-money laundering rules resulted in Standard Chartered losing more than a quarter of its market value in one day’s trading after the New York State Department of Financial Services (DFS) threatened to cancel its banking licence. But Peter Sands, Group CEO, is clear that these accusations are wildly overblown, largely inaccurate and have been released in a damaging and irresponsible manner.
DFS accused Standard Chartered of laundering $250 billion of Iranian oil money over a decade in defiance of a US order prohibiting such transactions and has threatened to take away Standard Chartered’s New York banking licence. This would be devastating for a bank which handles $190 billion of daily business clearing US dollar transactions.
The bank admits it has made mistakes, but billed these as errors rather than fraud in transactions between 2001 and 2007 that were held to be questionable under the sanctions rules on Iran. Those transactions were worth less than $14 million.
In an interview with the Business Standard, Sands says despite the equity erosion (the accusation wiped more than $17 billion off the bank’s value as its shares crashed 30 percent to a three-year low), client support remains as the errors during 2001 and 2007 were “good faith mistakes” rather than a conscious attempt to flout the sanctions, adding that the bank is planning for all possible outcomes and that it believes it won’t lose its licence.
“Proper due diligence was conducted on these transactions, mostly in London. The group takes its responsibilities very seriously, and seeks to comply at all times with the relevant laws,” Sands told the newspaper.
The US imposed economic sanctions on Iran in 1979, and banks in the United States, including branches of foreign firms, were forbidden from dealing directly with the country. However, certain transactions, known as “U-Turns”, remained lawful until November 2008.
These “U-Turn” transactions, which involve moving money for Iranian clients among banks in Britain and the Middle East, are at the centre of the current dispute because they were cleared through Standard Chartered’s New York branch.