Standard Chartered has seen £6bn (€7.46bn) wiped from its value amid fears it could lose its US banking licence after regulators branded the lender a “rogue institution” over its dealings with the Iranian government.
The 160-year-old bank saw shares plunge 16% after regulators claimed it exposed the US to terrorists and drug kingpins by hiding $250bn of transactions with Tehran.
The allegations will come as a shock given Standard’s reputation as a safe and sound bank, which described its approach as “boring” amid the turmoil engulfing the sector.
But the bank, which employs 2,100 staff in the UK, said it “strongly rejects” the portrayal by the New York State Department of Financial Services.
Standard, which will face the wrath of US regulators at a hearing next Wednesday, said the claims are inaccurate and that 99.9% of its dealings with Iran complied with regulation.
Meanwhile, MP John Mann accused US regulators and politicians of being anti-British in an attempt to shift financial markets from London to New York.
Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “There is some irony that, a few days after describing its approach as boring at its interim results, Standard Chartered should become embroiled in yet another potential banking scandal.”
Standard, which employs nearly 90,000 people worldwide and sponsors Liverpool Football Club, has been threatened with losing its licence to operate within New York state.
In an explosive legal order, Department of Financial Services superintendent Benjamin Lawsky said: “In short, SCB [Standard Chartered Bank] operated as a rogue institution.”
Standard, between Jan 2001 and 2010, conspired with Iranian clients to route payments through New York after stripping information from wire transfer messages used to identify sanctioned countries, the regulator claims.
The bank moved 60,000 transactions through its New York branch that were subject to US economic sanctions, and then covered up the dealings, the financial watchdog claims.
The institutions include the Central Bank of Iran as well as Bank Saderat and Bank Melli, both of which are Iranian state-owned.
The US suspects that Iraq was using its banks to finance “terrorist groups”.
Findings include a memo sent in Oct 2006 from the bank’s US chief executive to the group executive director in London, raising concerns about the activities with Iran.
He said: “Firstly, we believe [the Iranian business] needs urgent reviewing at the group level to evaluate if its returns and strategic benefits are... still commensurate with the potential to cause very serious or even catastrophic reputational damage to the group.
“Secondly, there is equally importantly potential of risk of subjecting management in US and London, for example you and I, and elsewhere, to personal reputational damages and/or serious criminal liability.”
The group executive director allegedly replied: “You fucking Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians?”
The watchdog, which reviewed 30,000 pages of documents during the investigation, also uncovered evidence of apparently similar schemes at the bank with other US-sanctioned countries such as Libya, Burma, and Sudan.
A statement from Standard said: “The group does not believe the order issued by the [Department of Financial Services] presents a full and accurate picture of the facts.”
City of London scandals
* Money laundering:A Senate investigation last month accused Europe’s biggest bank, HSBC, of allowing rogue states and drugs cartels to launder billions of pounds through its US arm.
* Libor-rigging:Shockwaves were sent through the banking industry at the end of June when US and UK regulators landed Barclays with a £290m (€360m) fine for manipulating Libor — a key interbank lending rate that affects mortgages and is linked to trillions of pounds of investments.
* Payment protection insurance mis-selling:The mis-selling of payment protection insurance is on course to be the costliest financial scandal in British financial history. The combined cost to the UK’s man banks hit £10bn in recent weeks and may end up even higher.
The insurance is designed to cover debt repayments if the holder is ill or loses their job and is often sold alongside personal loans, credit cards, and mortgages.
* Interest rate swaps mis-selling:Barclays, HSBC, Lloyds, and Royal Bank of Scotland all agreed in June to compensate customers over the mis-selling of complex financial products to small businesses.
So far, RBS, Barclays and HSBC have set aside provisions of £50m, £450m and £150m to deal with claims and compensation.
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