Standard Chartered agreed Tuesday to pay more than $1 billion (Dh3.6 bn) to resolve a long-running investigation into its handling of transactions that violated economic sanctions, a penalty whose severity reflects the London-based lender’s repeated violation of US sanctions on Iran.
A bank employee who worked in the UAE pleaded guilty to sanctions violations, and an Iranian customer was charged in absentia, the US Justice Department said.
As part of the settlement, which also included UK markets regulator the Financial Conduct Authority, the bank’s existing deferred-prosecution agreement with the Justice Department over similar conduct was extended by two years, according to a court filing.
The case against Standard Chartered is unusual in that the bank initially settled with US authorities in 2012, paying $667 million over its handling of transactions involving Iran from 2001 to 2007. While under a two-year deferred-prosecution agreement with the Justice Department, the bank revealed that it conducted other transactions for Iranian clients after the 2007 period that were not uncovered during the earlier investigation.
More than four years were added to that deferred-prosecution agreement as investigators scrutinised the bank and whether any individuals should be charged. The authorities examined payments handled by the bank’s Dubai-based unit for shell companies in the UAE that were trading with Iranian counterparts through the bank.
Standard Chartered admitted in the latest settlement that it processed hundreds of millions of dollars in clearing transactions between 2008 and 2014 through its Dubai offices on behalf of Iranian entities as well as clients connected to other countries subject to US sanctions laws. The bank said in February it had reserved $900 million to cover costs of the settlement.
The Financial Conduct Authority said its investigation had found a series of shortcomings in the lender’s financial crime controls, including one instance when an account was opened in a UAE branch for an unidentified “consulate” with a suitcase containing just over $653,050 in cash in the local currency. The regulator said the bank didn’t properly check the source of the money.
Standard Chartered said it accepted “full responsibility” for the violations of US sanctions and that the issues were related to the actions of two former junior employees “who were aware of certain customers’ Iranian connections and conspired with them to break the law, deceive the group and violate its policies,” said the bank in a written statement.
“The circumstances that led to today’s resolutions are completely unacceptable and not representative of the Standard Chartered that I am proud to lead today,” said Bill Winters, group chief executive officer of the bank.
In addition to the Justice Department and the New York bank regulator, US regulators participating in the agreement include the Treasury Department’s Office of Foreign Assets Control, the Federal Reserve and the Manhattan district attorney’s office.
Standard Chartered’s total of $1.06 billion in fines and penalties will be divided among multiple regulators. The Justice Department and the office of Manhattan District Attorney Cyrus Vance Junior will each receive $292 million. Vance’s office will forward approximately $284 million of its portion to the city and New York state, a spokesman said.
New York’s Department of Financial Services will receive $180 million, and the Federal Reserve will get $164 million. The UK Financial Conduct Authority’s portion is $133 million. (A $639 million penalty imposed by the Treasury Department will be satisfied by payments to other US agencies.)
The resolution offers a window into the U.S approach to enforcement under President Donald Trump. He has reasserted a hard line on Iran, which the administration views as a state sponsor of terrorism and a source of regional instability, scuttling the nuclear agreement struck by the Obama administration and re-imposing the sanctions regime that had been in place before. On Monday, the Trump administration for the first time designated an elite wing of Iran’s military as a foreign terror organisation.
At the same time, Justice Department officials have taken a softer stance on corporate crime, such as crediting companies for fines imposed by other authorities.
The US extended its monitoring oversight of Standard Chartered after the other violations were discovered, saying the bank may have failed to disclose violations that continued after the period covered in the original deal. The Justice Department’s continuing investigation found evidence suggesting that the bank’s Iranian business was more extensive than it admitted, five people familiar with the matter told Bloomberg News in August.
“Global financial institutions serve as the first line of defence against money laundering and the financing of terrorist activities, and those that fail to foster a strong compliance culture will be held accountable,” Linda Lacewell, the acting superintendent of New York’s DFS said in a written statement. “While Standard Chartered has taken significant remedial measures since 2014 to develop a more robust program to prevent these egregious activities, the time has come for the bank to finish the job.”
The monitoring and deferred-prosecution agreements were extended four times overall while authorities investigated the new allegations, weighed the evidence and ultimately began settlement negotiations. The most recent extension, on April 1, was for only 10 additional days, signalling that the case was coming to a close.