LONDON (AP) — The chief executive of Standard Chartered bank is in New York ahead of a hearing with the regulator who has branded the British bank a rogue operator that has hid transactions involving oil money for Iran.
The bank said that CEO Peter Sands is ready to meet with the regulator to discuss the charges, which could result in the bank having its license to operate in New York revoked. However, it is not clear that the bank will be invited or allowed to participate in Wednesday's hearing called by the New York State Department of Financial Services.
Standard Chartered has not confirmed reports that it has offered to settle the complaint for around $5 million, and the bank has complained that DFS broke ranks with other regulators in setting out its allegations on Aug. 6.
The bank and the Department of Financial Services remain miles apart in their descriptions of the case. The agency accuses the Standard Chartered of helping the Iranian government launder $250 billion in nearly 60,000 transactions between 2001 and 2007, violating U.S. sanctions.
"In short, SCB operated as a rogue institution," the regulator said in the order issued Aug. 6.
The bank has admitted violations on 300 transactions amounting to less than $14 million.
"There was no systematic attempt to circumvent sanctions," Sands said in a conference call last week. He described the 300 cash transfers as "clearly wrong and we are sorry that they happened."
Standard Chartered says it has been cooperating with the state agency and The Federal Reserve, the U.S. Treasury and Justice departments in their investigations.
The case hinges on Standard Chartered's use of a so-called U-turn mechanism which until November 2008 was permitted by the U.S. Treasury. The U-turn applied to transfers involving Iran which originated and ended in non-Iranian foreign banks.
The New York agency accuses Standard Chartered of deleting information which would have identified a transaction as linked to Iran.
Sands says "99.9 percent" of the transactions fully complied with regulations on U-turns. To get to $250 billion, he said last week, "you basically have to assume the whole U-turn payment mechanism was somehow invalid."
Mervyn King, governor of the Bank of England, last week contrasted the DFS move against Standard Chartered with the coordinated approach of American and British agencies to investigate Barclays' manipulation of the London interbank offered rate, a key interest-rate index known as LIBOR.
"In the LIBOR one, all the regulators involved, whether it be in the United States or in England, produced coordinated publication of reports which came out after the investigation was completed and they had made their judgments," King said. "That's very different from what's happened in the Standard Chartered case where one regulator, but not the others, has gone public while the investigation is still going on."
Ian Gordon, London-based analyst at Investec Securities, offered a more pugnacious view, describing Wednesday's hearing as a "show trial."
"We acknowledge that, with obvious, disturbing parallels with Putin's Russia and Stalin's USSR, the DFS still wields considerable 'absolute' power with grave consequences if used irresponsibly," Gordon said Monday, "but we expect sense to prevail."
