Standard Chartered and Iran -- disturbing allegations
A man walks past the Standard Chartered Bank building in Hong Kong. The London-based bank schemed with the Iranian government to launder $250 billion from 2001 to 2007, leaving the United States' financial system "vulnerable to terrorists," New York's financial regulator charged Monday, Aug. 6, 2012. Credit: AP, 2010
Did a big international bank secretly give aid and comfort to a rogue nation bent on developing nuclear weapons?
That's the explosive question implicit in allegations raised Monday by New York State financial regulators. While lots of banks have run into trouble in recent years, there's something especially disturbing about the charges leveled by New York's Department of Financial Services against Standard Chartered Bank, which is accused of scheming with Iran to circumvent U.S. sanctions.
U.S. financial sanctions on Iran date back to 1979 and exert pressure by choking off Iran's ties to the global financial system. But according to state banking regulators, the New York branch of Standard, a unit of London-based Standard Chartered Plc, processed nearly 60,000 Iran-related transactions worth at least $250 billion over the span of nearly a decade. The charge is that the bank covered up these transactions, many involving Iran's central bank, in part by stripping telltale information from wire-transfer messages.
In an order demanding the bank demonstrate why New York shouldn't revoke Standard Chartered's license in the state -- something akin to the death penalty for a big global bank -- the financial services department quotes damning internal emails in which one bank executive expressed fear of criminal prosecution for its Iran-related business, which the regulators say generated hundreds of millions in fees. The bank's actions, the state agency said, "left the U.S. 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."
Standard Chartered says it "strongly rejects the position or the portrayal of facts as set out in the order" by the New York agency, and that "well over 99.9% of the transactions relating to Iran" complied with regulations.
Like everyone else, big banks are innocent unless proven guilty. But allegations of lax controls and outright wrongdoing by major global financial institutions are as dismayingly common these days as home foreclosures. Among the London crowd, Barclays Plc was involved in rigging the benchmark London Interbank Offered Rate, the interest rate known as LIBOR. HSBC Holdings Plc, also under scrutiny in that bubbling scandal, has been in hot water for alleged U.S. money-laundering violations involving Mexican drug traffickers and Middle Eastern banks linked to terrorists. The shortcomings of the big American banks -- their reckless lending leading to the financial crisis, their cutting of legal corners on foreclosures -- are no secret either.
One banking analyst predicts Standard Chartered might have to pay a $1.5 billion fine, and shares in the bank's parent company fell 16 percent yesterday in London on news of the charges. But there's more to all this than dollars and cents. U.S. and European Union sanctions against Iran nowadays are aimed at heading off nuclear weapons development in that country, the prospect of which could prompt Israel to attack. If Standard Chartered really did undermine those sanctions, it was undermining the national security of Britain, the United States and Israel, potentially by undermining stability in the Middle East. That would be quite an accomplishment, even for a big bank.
