Standard Chartered has agreed to pay the New York State Department of Financial Services (DFS) $340 million to settle claims that it hid transactions with Iran.
The DFS alleged last week that Standard Chartered systematically sought to evade regulatory requirements relating to US dollar clearing transactions for Iranian clients from 2001-07. The regulator accused the bank of colluding with the Iranian government to hide about 60,000 transactions worth at least $250 billion over 10 years and had initially requested the UK bank to explain its conduct at a meeting on Aug. 15 2012.
Standard Chartered said a formal agreement containing the detailed terms of the settlement is expected to be concluded shortly.
In a separate statement, the DFS said the parties have agreed that the conduct at issue involved transactions of at least $250 billion.
In addition to the $340 million civil penalty, the parties agreed that Standard Chartered will install a monitor for a term of at least two years who will report directly to DFS and who will evaluate the money-laundering risk controls in the banks New York branch and implementation of appropriate corrective measures. In addition, DFS examiners shall be placed on site at the Bank, said the DFS. The Bank shall permanently install personnel within its New York branch to oversee and audit any offshore money-laundering due diligence and monitoring undertaken by the Bank.
Similarly, the bank will keep its license to operate in New York State.
Standard & Poor’s Ratings Services said the settlement has no immediate impact on its ratings on Standard Chartered PLC (A+/Stable/A-1) and its subsidiaries. The ratings agency said that while the settlement would impact 2012 profitability the impact would not be significant enough to weaken its capitalization materially.
Moody’s said the settlement is a positive credit development for the bank (A1, B-/a1, stable). However, Moody’s notes that investigations are ongoing with other bank supervisors in US, so further penalties remain a possibility. Moody’s will therefore continue to monitor developments.
Furthermore, the size of the monetary penalty, while large at $340 million, is containable relative to the Standard Chartered group’s pre-provision income of $8,181 million in the 12 months to June 2012, and would not in itself be material from a rating perspective, says Moodys.
(JDC)