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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
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."
"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
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."
"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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