LITTLE OVER a week ago, any suggestion that Standard Chartered bank fitted the description of a “rogue institution” would have been dismissed out of hand, or regarded as a clear case of mistaken identity. After all, the global bank had avoided all the recent financial scandals that have so greatly tarnished the image and reputation of its British peers – Barclays on interest rate fixing, and HSBC on money laundering in Mexico.
Standard Chartered had no role in the US subprime debacle; it was not involved in interest rate fixing, via Libor; and it did not mis-sell UK financial products to investors. Britain’s most successful bank last week reported record first-half profits for the tenth consecutive year. Nevertheless the allegation by a US regulator that Standard Chartered had breached sanctions on Iran on a monumental scale and over many years would, if proven, fully vindicate the regulator’s description of the bank as a “rogue institution”. The bank could not expect to survive such an adverse outcome.
The central charge made by New York state’s Department of Financial Services is that Standard Chartered had “schemed” with the Iranian government to process “60,000 secret transactions, involving at least $250 billion (€202 billion)”. The bank strongly rejects the claim while admitting to some minor mistakes. These it describes as “small clerical errors” and not wilful sanctions-busting. What remains striking is the gap between accuser and accused on the facts: between the regulator’s claims of thousands of sanction–breaking transactions by Standard Chartered involving hundreds of billions of dollars, and the bank’s claim that a mere $14 million of the transactions in question were problematic. What is equally surprising was the New York state regulator’s decision to go public with its allegations.
For Standard Chartered, the reputational damage has been huge, and could involve the bank taking legal action against the regulator, which has threatened to withdraw its banking licence in New York. More likely, an accommodation will be reached. On recent precedent this will involve a sizeable financial settlement – a $500 million fine has been mooted. But before that can be agreed, greater clarity is needed about the alleged role of the bank’s lawyers in advising that wire instructions should not identify the names of Iranian clients. Until that is properly explained, the jury remains out on whether Standard Chartered is indeed corporate villain or corporate victim.