Authors: Amat JENG and Lamin JAHATEH, both reporters with MarketPlace Business Newspaper of The Gambia
The parent company of Standard Chartered Bank Gambia has been asked to tell why its banking licence should not be revoked after it was alleged to have involved in a “scheme” with the Iranian government and hid from law-enforcement officials 60,000 secret transactions in order to generate hundreds of millions of dollars in fees, the MarketPlace has gathered.
In a rare move, New York’s top bank regulator threatened to strip the banking licence of Standard Chartered Plc, saying it was a “rogue institution” that hid US$250 billion in transactions tied to Iran, in violation of US law that sanctioned Iranian Government.
The loss of a New York banking licence would be a devastating blow to Standard Chartered, effectively cutting off direct access to the US bank market.
The New York State Department of Financial Services said that in a 30-page report released on 6 August this year, Standard Chartered, by scheming with the Iranian government, exposed the US banking system to terrorists, drug traffickers and corrupt states.
Some analysts opined that it’s unlikely that Standard Chartered would be stripped of its licence. “It’s difficult to think that the bank could lose its licence, but you can’t rule it out,” one of the analysts is quoted to have said.
The New York bank regulator is also demanding that the international bank pay for an independent monitor “to ensure compliance with rules governing the international transfer of funds.”
Since a US-led sanction on Iranian banks took effect, many banks in the West are not allowed to deal with banks representing the interest of the Islamic Republic of Iran – a move aimed at handicapping the Iranian economy, in order to halt its nuclear programme, which the US and Israel perceive as a potential threat.
The London share prices of Standard Chartered tumbled as much as 20 per cent after the New York State financial regulator’s accusation.
According to analysts, Standard Chartered’s shares dived on fears that the bank could lose its licence for US dollars, which could wipe 30-40 per cent off the group’s earnings.
The Guardian, a London-based newspaper, has reported that falling price of Standard Chartered’s share puts the top management of the bank under intense pressure.
Even though the highly regarded London-based bank has denied the accusations made by the New York’s state financial services regulator, investors were frightened following a spate of banking scandals which have unseated management at rival banks of Standard Chartered’s in the UK.
Standard Chartered had issued a statement refuting the allegations saying it does not believe the statements of the New York State Department of Financial Services presents a full and accurate picture of the facts.
In the statement, the bank said it has “overwhelmingly” complied with US sanctions and the regulations relating to U-turn payments.
The statement said: “As we have disclosed to the authorities, well over 99.9 per cent of the transactions relating to Iran complied with the U-turn regulations [which enables non-US countries to trade with Iran using dollars]. The total value of transactions which did not follow the U-turn was under $14m.”
At the center were the alleged “U-Turn” transactions, money moved for Iranian clients among banks in Britain and Middle East and cleared through Standard Chartered’s New York branch, but which neither started nor ended in Iran.
Such transactions were permissible until November 2008, when the Treasury Department prohibited them on concerns that they were being used to evade sanctions, and that Iran was using banks to fund nuclear and missile development programmes.
Standard Chartered, a financier in emerging markets, is the sixth foreign bank since 2008 to be implicated in dealings with sanctioned countries such as Iran in investigations led by federal and New York law-enforcement officials.
Four banks — Barclays Plc, Lloyds Banking Group, Credit Suisse Group and ING Bank NV — have agreed to fines and settlements totaling $1.8 billion. HSBC Holdings Plc currently is under investigation by U.S. law enforcement, according to bank regulatory filings.
Standard Chartered UK, last week posted record first-half net profit of $2.81bn, up 12 per cent from the previous corresponding period.
In a statement accompanying the results, chief executive Peter Sands lauded the bank’s “culture and values” as a source of strength over its competitors.
“We are selective and turn things down that we don’t understand, or don’t like the look of,” said Sands.