New York's top banking regulator reached a settlement on Tuesday with over charges that the British bank laundered hundreds of billions of dollars in tainted money with Iran and deliberately lied to regulators.
The bank agreed to pay $340 million to the Department of Financial Services, which is led by Benjamin M. Lawsky. “The parties have agreed that the conduct at issue involved transactions of at least $250 billion,†Mr. Lawsky said in a statement.
Tuesday's cease fire between the state regulator and Standard Chartered marks a big win for the department, which was formed last year.
As part of the settlement, the bank will install a monitor for at least two years to vet the bank's money laundering controls. In addition, the bank agreed to put in permanent officials who will audit the bank's internal procedures to prevent offshore money laundering.
Last week, the New York state regulator charged that Standard Chartered laundered $250 billion in tainted money for Iranian clients through its New York branch.
The bank's admission that it processed $250 billion in tainted money is slightly misleading, according to federal regulators briefed on the matter.
Standard Chartered has maintained that “99.9 percent†of the transactions under scrutiny, or all but about $14 million, complied with federal law and involved legitimate Iranian banks and corporations - not entities that had anything to do with supporting terrorist activities or the development of a nuclear weapon.
The bank's defense of its transactions still has traction with other authorities, including the Justice Department and the Manhattan District's attorney's office.
But Mr. Lawsky, according to the people briefed on the matter, has largely based his case on claims that the bank violated state law by masking the identities of its Iranian clients and thwarting American efforts to detect money laundering.
His order against Standard Chartered charged that the bank violated a panoply of state laws by failing to “maintain or make available at its New York branch office true and accurate books, accounts and records†of transactions including the “Iranian U-turn transactions.â€
The order also claims that the bank falsified records “with the intent to deceive the superintendent and examiners, supervisors and lawyers of the department and representatives of other U.S. regulatory agencies.â€
A hearing scheduled for Wednesday was canceled.
Mr. Lawsky stunned other federal authorities, particularly officials at the Federal Reserve and the Justice Department, who were also looking into the bank's activities, according to several people close to the case.
The agencies involved, including the Treasury Department, were debating just how expansive the suspected wrongdoing was at Standard Chartered when Mr. Lawsky leapfrogged ahead of them last week, according to the people close to the case. Some federal authorities still believe that the amount is much smaller, perhaps in the millions of dollars.
In its initial response to the accusations last week, the bank said that it “strongly rejects the position and portrayal of facts†by the agency.
The Federal Bureau of Investigation said that it had an open investigation into money laundering at Standard Chartered.
Beyond the dealings with Iran, the banking regulator said it had discovered evidence that Standard Chartered operated “similar schemes†to do business with other countries under United States sanctions, including Myanmar (formerly Burma), Libya and Sudan.
The “apparent fraudulent and deceptive conduct†by Standard Chartered happened from 2001 to 2010, the order said, and was particularly “egregious,†because some of the transactions were being processed even as the bank was under formal oversight by New York banking regulators from 2004 to 2007.
