Standard Chartered Plc (STAN) Chief
Executive Officer Peter Sands hit back at a New York regulator’s
claims the bank broke U.S. sanctions, and said he saw “no
grounds” for revoking the lender’s license.
Standard Chartered has tumbled about 16 percent in London
trading this week after New York regulator Benjamin Lawsky
threatened to strip the London-based bank of its license to
operate in the state, alleging it processed $250 billion of
deals with Iranian banks subject to sanctions.
“We reject the position and portrayal of facts by the
Department of Financial Services (HIG),” Sands said on a conference
call with reporters yesterday, his first public comments since
the regulator’s report on Aug. 6. “It would be disproportionate
and wholly inconsistent with the actions of other U.S.
authorities in other sanctions matters” to revoke the bank’s
New York license, he said.
The dispute is becoming increasingly political. Mayor of
London Boris Johnson yesterday accused New York of seeking to
damage its biggest competitor as a financial center, while Bank
of England Governor Mervyn King criticized the regulator for
failing to co-ordinate with its counterparts.
The stock rallied 7.1 percent to 1,315.5 pence in London
trading yesterday from 1,228.5 pence the day before. It had
started trading without the right to the latest dividend.
Excluding the effect of the dividend, the shares would have
climbed 8.6 percent. In Hong Kong, the bank rallied 3 percent to
HK$164.1 as of 9:49 a.m. after losing 15 percent over two days.
Sands, 50, said the probe has been “very damaging” to the
British lender’s brand, and denied that there was anything wrong
with the bank’s culture. He added that none of the transactions
reviewed by the bank were linked to terrorist organizations.
“There are lots of matters in that order that frankly
either we don’t recognize or we don’t understand or are
factually inaccurate,” Sands said, referring to the report.
The lender has consulted lawyers and been advised that it
may have a case for claiming reputational damage, the Financial
Times reported today, citing two people it didn’t identify.
Standard Chartered is aware of the sensitivity involved in
taking a militant stance toward its regulator, the paper said.
The bank might be asked to pay as much as $700 million to
resolve money-laundering allegations filed by Lawsky, New York’s
banking superintendent, after the Department of Financial
Services grew impatient with inaction by federal regulators, a
person familiar with the case said.
Lawsky tried unsuccessfully a few months ago to get U.S.
regulators to punish the bank for conduct involving disguised
Iranian money transfers, said the person, who asked not to be
identified because the matter is confidential. The transfers
have been under investigation by federal agencies for more than
two years, according to Lawsky’s statement.
“The order we received from the DFS came as a complete
surprise,” Sands said on the call. “The surprise was in the
manner of the announcement and that the DFS made an announcement
on its own and without giving us prior notice. The resolution of
such matters normally proceeds through a coordinated approach by
the different agencies.”
King yesterday criticized Lawsky’s order, saying at a press
conference that U.K. authorities would “ask that various
regulatory bodies that are investigating a particular case try
to work together.” Johnson used a column for the London-based
Spectator magazine to attack the regulator.
Motivated by Jealousy
“You can’t help wondering whether all this beating up of
British banks and bankers is starting to shade into
protectionism,” he wrote. “And you can’t help thinking it
might actually be at least partly motivated by jealousy of
London’s financial sector — a simple desire to knock a rival
There was also friction with the Federal Reserve and U.S.
Treasury Department, the Financial Times reported, citing
another person it didn’t identify. The two, and the Justice
Department and Manhattan district attorney’s office, are probing
the bank’s links to Iran, it said.
“The federal authorities have been quieter because they
understand they have to work this out at international level,
where Lawsky has gone ahead,” Syed Kamall, a U.K. Conservative
member of the European Parliament and member of its Economic and
Finance Committee, said. “And it’s a nice story, Iran-bashing,
at the moment, given the current concerns internationally.”
The investigation is focusing on so-called U-turn
transactions, which could allow an Iranian bank to access the
U.S. banking system indirectly through a third-party bank.
Standard Chartered hired an external consultant to probe
about 150 million payment transactions conducted between 2001
and 2007, Sands said.
Transactions had to be initiated offshore by banks that
were neither U.S. nor Iranian and only passed through the U.S.
financial system on the way to other non-Iranian, non U.S.
banks. Standard Chartered broke the rules by stripping wire
transfer orders involving its New York branch of any reference
to the involvement of Iranian banks, the regulator said.
Fewer than 300 of the transactions, amounting to about $14
million, weren’t valid U-turns, Sands said yesterday.
“That is clearly wrong and we’re sorry that those mistakes
occurred,” Sands said. “There was no systematic attempt to
The regulator in its report quoted Standard Chartered’s
then executive director of risk as asking “who are you to tell
us, the rest of the world, that we’re not going to deal with
Sands said the quote was based on an individual’s
recollection of a meeting rather than an e-mail or document.
Finance Director Richard Meddings was executive director of risk
at the time, he said.
“No-one at that meeting claims to have made that
statement, so we don’t believe the quote is accurate,” he said.
A settlement of $700 million would match the amount that
HSBC Holdings Plc (HSBA) set aside last month after a Senate committee
found the bank gave terrorists, drug cartels and criminals
access to the U.S. financial system.
“Despite widespread distaste for the New York State
Department’s conduct, a settlement may yet be seen as
expedient,” said Ian Gordon, an analyst at Investec Plc (INVP) in
London with a buy rating on the stock. “Any settlement on
broadly the above terms would, relative to alternatives, be
taken with considerable relief by the markets.”
To contact the reporters on this story:
Gavin Finch in London at
Howard Mustoe in London at
To contact the editor responsible for this story:
Edward Evans at