Standard Chartered to Pay $327M to Settle Money Laundering Claims

WASHINGTON, D.C. - (Mealey's) Standard Chartered Bank (SCB) has agreed to the forfeiture of $227 million to the U.S. Department of Justice and to pay a $100 million penalty to the Federal Reserve Board for violating the International Emergency Economic Powers Act (IEEPA) by engaging in what is being deemed illegal transactions with a number of sanctioned entities, according to a Dec. 11 press release issued by the U.S. Attorney's Office for the District of Columbia.

According to the press release, SCB "has agreed to the forfeiture as part of a deferred prosecution agreement with the Justice Department and a deferred prosecution agreement with the New York County District Attorney's Office for violating New York state laws by illegally moving millions of dollars through the U.S. financial system on behalf of sanctioned Iranian, Sudanese, Libyan and Burmese entities."

Under the terms of the settlement agreement, a $135 million Treasury Department Office of Foreign Assets Control (OFAC) penalty "will be satisfied by $227 million forfeited in connection with the bank's resolution with the Justice Department."

Policies And Procedures

According to the press release, "OFAC's settlement agreement further requires the bank to conduct a review of its policies and procedures and their implementation, taking a risk-based sampling of U.S. dollar payments to ensure that its OFAC compliance program is functioning effectively to detect, correct and report apparent sanctions violations to OFAC."

The Justice Department filed a criminal information in the U.S. District Court for the District of Columbia, charging SCB with one count of knowingly and willfully conspiring to violate the IEEPA. 

According to the press release, SCB "waived the federal indictment, agreed to the filing of the information and has accepted responsibility for its criminal conduct and that of its employees."

London, Dubai

"Standard Chartered Bank (SCB) operates a branch in New York (SCB New York) that provides wholesale banking services, primarily U.S.-dollar clearing for international wire payments.  SCB New York also provides U.S.-dollar correspondent banking services for SCB's branches in London and Dubai.  According to court documents, from 2001 through 2007, SCB violated U.S. and New York state laws by moving millions of dollars illegally through the U.S. financial system on behalf of Iranian, Sudanese, Libyan and Burmese entities subject to U.S. economic sanctions.  SCB knowingly and willfully engaged in this criminal conduct, which caused SCB's branch in New York and unaffiliated U.S. financial institutions to process over $200 million in transactions that otherwise should have been rejected, blocked or stopped for investigation under Office of Foreign Assets Control regulations relating to transactions involving sanctioned countries and parties," according to the press release.

"According to court documents, SCB engaged in this criminal conduct by, among other things, instructing a customer in a sanctioned country to represent itself using SCB London's unique banking code in payment messages, replacing references to sanctioned entities in payment messages with special characters and deleting payment data that would have revealed the involvement of sanctioned entities and countries using wire payment methods that masked their involvement.  This conduct occurred in various business units within SCB in locations around the world, primarily SCB London and SCB Dubai, with the knowledge and approval of senior corporate managers and the legal and compliance departments of SCB."

Moreover, SCB is alleged to have made false and misleading statements to federal regulators "to further conceal its business with sanctioned countries."

Global Instructions

"In August 2003, SCB wrote in a letter to OFAC that the use of cover payments for transactions related to sanctioned countries was contrary to SCB's global instructions.  In fact, SCB used the cover payment method to effect billions of dollars in payments, lawful and unlawful, through SCB New York originating from or for the benefit of customers in Iran, Libya, Burma and Sudan - all U.S. sanctioned countries - and continued to do so after the letter was sent," according to the press release.

The U.S. Attorney's press release is available online at www.justice.gov/usao/dc/news/2012/dec/12-435.html.

SCB also reached a settlement agreement with the Board of Governors of the Federal Reserve System today, agreeing to a $100 million penalty assessment and the issuance of a consent order to cease and desist regarding its role in the transactions with the sanctioned entities.

Cease And Desist Order

Under the terms of the cease and desist order, SCB "must improve its program for compliance with U.S. economic sanctions, Bank Secrecy Act, and anti-money-laundering requirements.  The United Kingdom's Financial Services Authority, the home country supervisor of Standard Chartered, has agreed to assist the Federal Reserve in the supervision of the cease and desist order."

The Federal Reserve Board's press release is available online at www.federalreserve.gov/newsevents/press/enforcement/20121210a.htm.

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