Critics say enforcement actions have fallen short of serving as a deterrent, especially since the punishments resulted in fines but no jail time. Policing the world’s banking system, others say, is no small task. And regulators are doing as much as they can in the face of rampant deception.
Indeed, some federal regulators wanted to move slower on Standard Chartered to make sure they had the strongest case possible.
The bank, whose stock tumbled more than 16 percent Tuesday, said “99.9 percent”of the transactions were legitimate. About $14 million slipped through the cracks, the banks said. But that may still be enough to put its ability to operate in the United States in jeopardy.
In 2003, the Federal Reserve Bank of New York first raised concerns about the bank’s money- laundering controls after discovering deficiencies. Standard Chartered entered into an agreement with regulators to shore up its controls and conduct an independent audit of its transactions from 2002 to 2004.
The bank, with the help of consultant Deloitte & Touch, allegedly omitted critical transactions from its report to regulators, according to an investigation unveiled Monday by Benjamin Lawsky, superintendent of New York’s Department of Financial Services. Deloitte denied any wrongdoing.
Lawsky’s office said, well after 2003, that Standard Chartered continued to remove crucial identifiers in financial transactions that would have indicated it was involved in financing activities in Iran. With that much effort dedicated to deceiving regulators, there may not have been much more the government could do, said Juan Carlos Zarate, a senior adviser at the Center for Strategic and International Studies, a nonpartisan think tank.“The government is doing what it can,” he said. “The reality is banks continue to be the gatekeepers in the financial system and continue to make a choice as to whether they will engage in suspect behavior.”
But James Gurule, a former undersecretary of enforcement for the Treasury Department and now a law professor at the University of Notre Dame, contends that regulators have long been asleep at the wheel. “Why up until this point has no bank official been held criminally responsible for willful and intentional violations of U.S. economic sanctions and anti-money-laundering laws?” Gurule said. “The Department of Justice enters into a deferred prosecution agreement, the banks pay a fine and that’s the end of it.”