The New York State Department of Financial Services slammed Standard Chartered Bank as a "rogue institution" that "schemed" with the Iranian government, which is subject to U.S. sanctions over its nuclear program. (OLIVIA HARRIS/REUTERS)

The Treasury Department on Wednesday sent a letter to British financial regulators clarifying U.S. laws on Iranian transactions before and after 2008, an inquiry that appears to be tied to the ongoing investigation of London-based Standard Chartered Bank.

In the letter, Adam J. Szubin, director of Treasury’s Office of Foreign Assets Control, details changes the agency made four years ago to tighten restrictions on fund transfers to Iran. Back then, Treasury barred so-called “U-Turn” transactions—where a foreign entity routes money to a bank in the U.S, which immediately transfers the money to another foreign entity.

“Prior to OFAC’s amendments to its regulations in November 2008, our regulations allowed foreign parties at non-U.S. financial institutions to conduct U.S. dollar clearing transactions under certain conditions....OFAC’s Iranian Transactions Regulation authorized U.S. depository institutions to process funds transfers to and from Iran, or for the direct or indirect benefit of persons in Iran, if the transfers:

(a) did not involve the debiting or crediting of an Iranian account maintained on the books of a U.S. depository institution (the accounts of both the ultimate originator and beneficiary were held on the books of a non-U.S. financial institution); and (b) did not involve a person or entity whose property and interests in property are blocked, such as a bank designated by OFAC pursuant to U.S. sanctions on proliferations of weapons of mass destruction.”

Why does any of this matter?

According to Standard Chartered, “99.9 percent” of the $250 billion it handled for Iran between 2001 and 2007 were U-Turn deals, meaning they were legal at the time. Problem is the remaining 0.1 percent, or $14 million, was not up to snuff. And until further details are provided about the 99.9 percent, there is no way to trust those transactions were above board either.

What this letter shows is what many sources have already confirmed: there is a much broader investigation of Standard Chartered under way.

Szubin pointed out in the letter that the U-Turn explanation “is not a comment” on the state of New York’s order against the bank, but Treasury is doing some digging of its own.

As Szubin said, the agency “will continue to coordinate with other federal and state our investigation of the bank.”

Treasury, like the Justice Department and Federal Reserve, has been mums on what course of action it intend to take in the Standard Chartered affair. If history serves as any clue, it is likely the federal regulators are working on a coordinated enforcement action against the bank, just as they did in money laundering cases involving Barclays, ING Bank and Credit Suisse.