Bank deal earns NY regulator friends, foes

ALBANY -- New York financial regulator Benjamin Lawsky, an Ivy League ex-prosecutor and top lieutenant to Gov. Andrew M. Cuomo, shook a record $340 million settlement last week from a major British bank accused of money-laundering for Iran, earning both praise for his aggressive approach and criticism from those who saw it as a publicity grab.

Despite the sniping from banks, other regulators and the financial press, ex-colleagues said the 42-year-old married father of two is unlikely to back off. Like others in the Cuomo administration, he's a team player who works in concert with the popular Democratic governor who appointed him.

"Banks are upset with Lawsky because he's clearly put down a marker that he's going to be an aggressive regulator who defends the interests of New York State in a manner that goes beyond the enablement of the federal regulators in recent years," said Neil Barofsky, former inspector general of the federal Troubled Asset Relief Program that followed 2007's market collapse.

He and Lawsky were assistant U.S. attorneys in Manhattan and worked together later on a Bank of America case when Lawsky was a special assistant to then-New York Attorney General Cuomo.

In the Standard Chartered case, Lawsky said the bank laundered $250 billion for Iran, in violation of U.S. trading sanctions, leaving the U.S. financial system "vulnerable to terrorists" in order to reap hundreds of millions in profits. He threatened to revoke the bank's New York license to halt its $190 billion-a-day currency-clearing business in one of the world's financial capitals.

Standard Chartered had been negotiating for months on a settlement with the Treasury Department, the Federal Reserve, the Justice Department and the Manhattan district attorney's office, which had settled similar cases for $1.8 billion over the previous three years with ING Bank, Barclay's Lloyd's and Credit Suisse. Standard Chartered said those talks continue.

The civil settlement requires Standard Chartered to install a monitor for two years to evaluate the money-laundering risk controls in its New York branch, a monitor who reports directly to Lawsky's Department of Financial Services. The bank also must permanently install personnel in New York to oversee and audit its controls.

Barofsky called parochial complaints and criticism now by federal regulators "sadly predictable." While Lawsky has an enforcement hammer, licensing, the Justice Department and Treasury Department have an even bigger one, which is prosecution, he said. "It's a pretty significant penalty he extracted for his very small piece of this case," Barofsky said.

Others though, including banking attorney Michael Horn, chairman of the Federal Home Loan Bank Board of New York and New Jersey's former banking commissioner, said Standard Chartered "got off easy" and should have been banned from doing U.S. business. "I applaud the department for taking the bull by the horns because these things take forever. I just think the penalty is paltry," he said.

The Wall Street Journal said in an editorial that other U.S. investigations have been under way for a long time, and Lawsky's "main contribution seems to have been to jump the queue so he could get a big publicity score." Lawsky declined several requests for interviews.