Brit bank faces showdown on laundering accusation

LONDON -- The British bank Standard Chartered Plc is facing a meeting in Manhattan next week with New York State regulators who could yank the company's license to operate in the state.

The New York State Department of Financial Services Monday accused the bank of laundering money for Iran, and making the U.S. financial system "vulnerable to terrorists."

The allegation sent the company's stock reeling on the London Stock Exchange, and Bloomberg News reported company shares fell 16.4 percent, their biggest decline since 1988, the earliest date for which data are available. At closing the stock was down $241.50 at $1,228.50.

The New York regulator has ordered Standard Chartered representatives to appear in Manhattan on Aug. 15 "to explain these apparent violations of law" and to demonstrate why its license to operate in the state of New York "should not be revoked."

Bloomberg News also reported that the bank may be facing $5.5 billion in fines and revenue loss.

The state financial agency alleged that Standard Chartered schemed with the Iranian government to launder $250 billion between 2001 and 2007, leaving the U.S. financial system "vulnerable to terrorists."

Standard Chartered has said it "strongly rejects" the allegations. In a statement, the bank said "well over 99.9 percent" of the questioned transactions with Iran complied with all regulations, and the exceptions amounted to $14 million.

The New York agency alleged that Standard Chartered conspired with Iranian clients to route nearly 60,000 different U.S. dollar payments through Standard Chartered's New York branch "after first stripping information from wire transfer messages used to identify sanctioned countries, individuals and entities."

The New York regulators called the bank a rogue institution and quoted one of its executives as saying: "You [expletive] Americans. Who are you to tell us, the rest of the world, that we're not going to deal with Iranians."

The order also identifies an October 2006 "panicked message" from a London group executive director who worried the transactions could lead to "very serious or even catastrophic reputational damage to the group."

Between 2004 and 2007, about half the period covered by the order, the New York financial agency claims Standard Chartered hid from and lied about its Iranian transactions to the Federal Reserve Bank of New York. Before 2008, banks were allowed to transact some business with Iran, but only with full reporting and disclosure, the order states.

In 2008, the U.S. Treasury Department stopped those transactions because it suspected they helped pay for Iran to develop nuclear weapons and finance terrorist groups including Hamas and Hezbollah. The order states the bank has to provide information and answer questions to determine if any of the funding aided the groups or Iran's nuclear program.

Gary Greenwood, analyst at Shore Capital in London, said the possible revocation of the New York license was of far greater concern than any potential fine, which could run into hundreds of millions of dollars.

Standard Chartered's U.S. operation facilitates trade for customers that have operations in both the U.S. and emerging markets.

"Indeed, this is an area of the business that has been highlighted by management for growth," Greenwood said. "A loss of its U.S. banking license would not only jeopardize part of this profit stream, but the associated reputational damage could also have a severely damaging impact to its operations within emerging markets."

If proven, the scheme would violate state money-laundering laws. The order also accuses the bank of falsifying business records, obstructing governmental administration, failing to report misconduct to the state quickly, evading federal sanctions and other illegal acts.