New York regulators have accused Standard Chartered of trying to hide some $250 billion in transactions with Iranian companies. Federal authorities are also reviewing the bank's transactions.
A man walks past the Standard Chartered bank building in Hong Kong Tuesday. Shares in Standard Chartered PLC dropped sharply on Tuesday as investors reacted to US charges that the bank was involved in laundering money for Iran.
Kin Cheung/AP
EnlargeSince 2008, the United States has imposed a total ban on financial institutions dealing with Iranian firms.
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But between 2001 and 2008, it was legal to do banking with Iran as long as a bank made sure the transactions were not improper.
On Monday, the New York State Department of Financial Services (DFS) accused Standard Chartered Bank, a large British banking organization with major operations in New York City, of ignoring the 2001-08 regulations and trying to hide some $250 billion in transactions with Iranian companies.
The DFS also accused Standard Chartered of acting like a ?rogue institution? and ordered it to appear on Aug. 15 before the state?s superintendent of banking to explain why it should not have its license to operate in New York revoked.
As if that isn't enough, the bank may have more trouble on its hands: Federal authorities are also reviewing the bank's transactions, and the Department of Justice could bring legal action.
What the DFS has done so far is part of a large-scale crackdown on financial institutions? dealings with Iran due to its controversial nuclear program. Last month, a US Senate report accused another large British bank, HSBC, of violating the 2001-08 rules. A senior executive at the bank subsequently resigned. Also last month, Congress reached agreement on a bill that would restrict the dealings of energy, shipping, and insurance companies with Iran.
?Global banks want access to US dollars and the US wire-transfer systems,? said Sen. Carl Levin (D) of Michigan at a hearing on the HSBC violations on July 20. ?They want the safety, efficiency, and reliability that are the hallmarks of US banking. But some banks abuse that privilege.?
The crackdown comes at time when financial institutions are under the microscope for transgressions. Federal bank regulators are still assessing what to do about the recent news that large banks, such as Barclays, had been involved in manipulating international interest rates in their favor. And regulators are closely monitoring JPMorgan Chase, which has reported that it lost billions of dollars in trades that went against it.
However, until the DFS action, Standard Chartered had largely stayed out of the headlines. The bank is best known for operating in emerging markets such as India and China. According to Financial Times bank rankings, the bank has about $800 billion in assets, making it the 21st largest in the world. The bank has 1,700 offices in 70 markets worldwide, the DFS says.
In 2011, the bank had income of $17.6 billion and a profit of $5 billion, the highest in its 150-year history. One major source of profits, according to the DFS, is clearing money for its foreign clients. It clears $190 billion per day in New York for major international companies involved in trade and finance.
The DFS, as part of its complaint, says it wants the bank to explain why it should not temporarily suspend its money-clearing operations pending a formal license revocation.
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