US regulator pulls up StanChart for $250-bn Iran transactions

Standard Chartered Bank today 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.

"For almost ten years, SCB (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 July 17 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 bank's money laundering compliance.

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