London-based Standard Chartered Bank on Monday became the latest major international financial institution accused of evading money-laundering controls to move billions of dollars through the U.S. financial system on behalf of Iranian banks and corporations.
In a 27-page report, New York’s financial regulator accused the bank of scheming with the Iranian government to launder $250 billion from 2001 to 2007, leaving the United States “vulnerable to terrorists.”
The bank removed crucial identifiers in financial transactions that would have indicated it was involved in financing activities in Iran, according to the investigation by Benjamin Lawsky, superintendent of the state’s department of financial services.
Calling the bank a rogue institution, the state agency quoted one of its executives as saying: “You . . . Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians.”
The sanctions against Iran were put in place for two reasons: to make it harder for the country to acquire technology and material necessary for its nuclear and missile programs, and to impose economic penalties on institutions that backed those efforts.
U.S. banks have software filters that identify electronic transactions involving entities and countries barred from the U.S. financial system. Because so much of the world’s financing flows through the United States, the prohibition makes it hard for countries and companies that are barred from doing business with U.S. firms.
In their multi-year effort to cut Iran off from key international financial markets, regulators say they have found similar behavior at Lloyds, UBS, Credit Suisse, Barclays and other banks that stripped out identifying features on wire transactions so the filters would not catch them.
As a result, the transactions appeared to be from the international bank rather than a barred Iranian financial institution like Bank Melli. Lloyds, for instance, admitted that from 2001 to 2004 it allowed three Iranian banks and their customers to move more than $300 million through the U.S. financial system by removing information that identified the transactions as Iranian. The banks were Bank Melli, Sepah Bank and Bank Saderat.
The stripping of this information was so systematic at Lloyds that the bank had a handbook for employees demonstrating how to remove the Iran identifiers, according to a former U.S. government investigator who saw a copy of the instructions.
In the case of Standard Chartered, the New York regulator said the transactions with Iran provided the bank with millions of dollars in fees at a time when such trade was restricted.
Standard Chartered Bank said in a statement Monday that it was reviewing “its historical U.S. sanctions compliance and is discussing that review with U.S. enforcement agencies and regulators,” according to the Associated Press. It said it couldn’t predict when the review and the discussions would be completed “or what the outcome will be.”
The bank also said it had no prior notice of the order from the New York regulator.
If proven, the scheme would violate state money-laundering laws and the bank could lose its charter to operate in the United States. The order also accused the bank of falsifying business records, obstructing governmental administration, failing to report misconduct to the state quickly, evading federal sanctions and other illegal acts.
Between 2004 and 2007, about half the period covered by the order, the department claims Standard Chartered hid from and lied about its Iranian transactions to the Federal Reserve Bank of New York. Before 2008, banks were allowed to transact some business with Iran, but only with full reporting and disclosure, the order states.
In 2008, the U.S. Treasury Department stopped those transactions because it suspected that they helped pay for Iran to develop nuclear weapons and finance terrorist groups including Hamas and Hezbollah.
The Associated Press contributed to this report.