New York regulators today accused Standard Chartered Bank of hiding $250 billion in transactions with Iranian banks for almost a decade in violation of US sanctions.
Branding the London-based global financial giant a "rogue bank," state regulators said Standard Chartered systematically disguised foreign exchange deals with Iran in a breach of controls that potentially opened up the US banking system to terrorists and criminals.
New York's Department of Financial Services threatened the bank with fines and possible suspension of its license to operate in the state, hub of the US financial industry, in the latest US move against foreign banks trading with Tehran.
Standard Chartered was ordered to appear on August 15 "to explain these apparent violations of law and to demonstrate why SCB's license to operate in the State of New York should not be revoked."
"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," it said.
The transactions mainly involved handling US dollar transfers for major state-owned Iranian banks, including the 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 transaction reports 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 it also had found evidence of possible illegal transactions with Libya, Myanmar and Sudan while those countries were under US sanctions.
In London, Standard Chartered said in a statement that it "is conducting a review of its historical US sanctions compliance and is discussing that review with US enforcement agencies and regulators.
"The Group cannot predict when this review and these discussions will be completed or what the outcome will be."
The bank could face steep fines over its Iran business.
In July, a US Senate report accused HSBC, also based in London, of concealing more than $16 billion in sensitive transactions with Iran and Mexican drug lords over 2001-2007.
And in June ING Bank was fined $619 million for its role in processing $1.6 billion through the US financial system for Cuba, Iran, Myanmar, Sudan and Libya.
The New York regulator said Standard Chartered's illicit Iran business involved thousands of so-called U-turn transactions, in which dollar-denominated payments and transfers are routed into and then out of the United States by non-US entities.
Such deals involving Iranian institutions were strictly limited, and more recently completely banned, under US sanctions against Tehran.
But the regulator, citing internal Standard Chartered documents, said bank's London office routinely stripped the transactions of any signs that Iranian banks were involved.
"Senior SCB management knowingly embraced the bank's fraudulent U-Turn procedures," the department said.
The bank's attitude was captured in a comment from a Standard Chartered group executive director, as related to the New York regulator by an officer of Standard Chartered's New York branch.
"You f---ing Americans. Who are you to tell us, the rest of the world, that we're not going to deal with Iranians?" the group executive director purportedly said.
In late London trade Standard Chartered shares plummeted 6.2 percent to 1,470 pence after the news of the New York regulator's accusations hit the market.
The US Treasury, which implements the sanctions, said it could not comment on the New York investigation, but added that it "treats sanctions violations extremely seriously" and has collected more than $1 billion in fines and forfeitures in the past few years enforcing sanctions violations.