New York’s top financial regulator accused a Standard Chartered PLC (STAN.LN) unit of running a “rogue institution” that “schemed” with Iran’s government to hide more than $250 billion in illegal transactions for nearly a decade.
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The allegations were made in a 27-page order filed Monday by Benjamin M. Lawsky, superintendent of the New York State Department of Financial Services. Mr. Lawsky said the agency’s ongoing investigation of the U.K. bank also “has uncovered evidence with respect to what are apparently similar schemes” by a Standard Chartered subsidiary in New York “to conduct business with other U.S. sanctioned countries, such as Libya, Burma and Sudan.”
The order described what Mr. Lawsky claimed was an effort to skirt U.S. rules that prohibit “U-turn” transactions, in which a non-U.S. financial institution transfers money through a U.S. bank, which then sends dollars directly to another non-U.S. financial institution.
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Standard Chartered was notified of the regulatory action on Monday. A bank spokeswoman in New York declined immediate comment. A Federal Reserve Bank of New York spokesman wasn’t immediately available to comment. The New York Fed also regulates Standard Chartered’s New York unit.
According to the regulatory order, bank officials organized a system for filling in wire transfer or other transaction paperwork with no client identification or false client identification. The moves were aimed at helping the transactions for Iranian banks flow through the financial system, Mr. Lawsky alleged in Monday’s regulatory order.
Standard Chartered executives called the operations “Project Gazelle,” and the practice was approved of by the highest-level managers of the bank, including risk, legal and compliance officers, according to the order. The bank even published a manual that detailed how employees should fill in certain codes and fields on wire transfer orders to avoid detection by U.S. monitors.
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When some executives became concerned about the practice causing reputational damage and legal liability, they found ways to enhance their methods of hiding their Iranian clients rather than halting the transactions, said Mr. Lawsky in the order.
Mr. Lawsky said the agency’s ongoing investigation of the U.K. bank also “has uncovered evidence with respect to what are apparently similar schemes” by a Standard Chartered subsidiary in New York “to conduct business with other U.S. sanctioned countries, such as Libya, Burma and Sudan.”
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