NEW YORK — The Treasury Department and Federal Reserve were blindsided and angered by the decision of a New York banking regulator to launch an explosive attack on Standard Chartered over $250 billion in alleged money-laundering transactions tied to Iran, sources familiar with the situation said.
By going it alone through the order he issued Monday, the head of the recently created New York State Department of Financial Services, Benjamin Lawsky, also complicates talks between the Treasury and London-based Standard Chartered to settle claims over the transactions, several of the sources said.
Simon Maughan, a financial industry strategist at Olivetree Securities, talks about money-laundering allegations filed against Standard Chartered Plc and his recommendation for the stock.
More business news
A year later, Facebook has tightened its focus on becoming a mobile, profitable company.
Terminal near Freeport, Tex., is granted permission to ship liquefied natural gas to Japan.
Concerns over genetically modified seeds could cripple talks that aim to boost European, U.S. economies.
More business news
His action, which included releasing embarrassing communications and details of the bank’s alleged defiance of U.S. sanctions, is rewriting the playbook on how foreign banks settle cases involving the processing of shadowy funds tied to sanctioned countries. Such cases have usually been settled through negotiated settlements with public shaming kept to a minimum.
In his order, Lawsky said the bank’s dealings exposed the U.S. banking system to terrorists, drug traffickers and corrupt states.
But the upset expressed by some federal officials, who were given almost no notice of the action, may provide ammunition for Standard Chartered to portray the allegations as coming from a relatively new and over-zealous regulator.
Given the content of the order, which described Standard Chartered as a “rogue institution” that “schemed” with the Iranian government and hid from law enforcement officials some 60,000 transactions over nearly 10 years, the bank may need to come up with a strong defense.
Lawsky did not respond to several requests for comment.
A Fed spokesman said the agency had been working with prosecutorial offices on matters involving Iran and other sanctioned entities but could not comment on ongoing investigations.
White House press secretary Jay Carney said the Treasury remains in contact with federal and state authorities on the matter. The Treasury declined to add to that comment.
New York’s attack on the bank’s integrity and especially its threat to revoke Standard Chartered’s state banking license wiped $17 billion off the bank’s market value on Tuesday.
The loss of a New York banking license — effectively a permit to conduct transactions worth hundreds of billions of U.S. dollars — could be a death knell for a global bank like Standard Chartered.
The bank said it has been in talks with U.S. authorities over its Iran transactions since 2010 and stressed that the accusations by New York came as a shock.