- Thursday, 29 November 2012 00:05
By LIZ RAPPAPORT and DAVID ENRICH
Standard Chartered STAN.LN 0.00% PLC is nearing a settlement with U.S. authorities over transactions with Iranian clients that may have violated U.S. sanctions against the Middle Eastern country, said people involved in the negotiations.
The bank is likely to pay around $300 million in fines, concluding investigations brought in recent years by the U.S. Department of Justice, the U.S. Treasury Department, the Federal Reserve and the Manhattan District Attorney's office, according to the people. The authorities declined to comment.
[image] Bloomberg News
Standard Chartered's CEO Peter Sands. The British bank is near a pact with U.S. authorities over transactions with Iranian clients.
The agreement would end a messy chapter that started with allegations by New York's top financial regulator that the fifth-biggest U.K. bank had acted as a "rogue institution," conducting more than $250 billion in transactions with Iranian entities and violating New York law.
The allegations caused a stir among U.S. and U.K. regulators, who complained that Benjamin Lawsky, the superintendent of the New York Department of Financial Services, had overstepped. Standard Chartered settled the New York case in August for $340 million.
Settlement talks with the other regulators are continuing, but all sides are aiming to reach a conclusion in the coming days, said the people.
"Most of the underbrush has been cleared," said one of the people involved in the talks, who added that the agencies have been coordinating for the past couple of months to bring the matter to a close.
At issue are transactions Standard Chartered conducted for Iranian financial institutions in U.S. dollars through its New York unit, possibly running afoul of laws prohibiting such dealings.
The U.S. government has restricted financial transactions with Iran since 1979. The rules became more stringent in 1995, forcing banks to closely monitor and report to regulators any suspicious movements of money through the U.S.
Finding violations of the sanctions has been challenging because hundreds of billions of dollars in transfers move through the global financial system on a given day.
Also, the U.S. Treasury Department until 2008 permitted dollar transactions where a client bought and sold dollars to itself with a U.S. intermediary, called U-turn transactions, to be done without identifying clients as long as the bank showed it had robust due-diligence and compliance procedures for evaluating clients.
In 2008, the government moved to stop U-turn transactions entirely and tightened standards in money transferring activity.
The Justice Department has been investigating Standard Chartered since early 2009, people familiar with the matter said. It is unclear when the other investigations officially began.
The probes come as U.S. authorities have more broadly cracked down on banks for doing business with forbidden nations and counterparties.
This summer U.S. Senate investigators accused HSBC Holdings PLC of ignoring signs the U.K. bank was a harbor for money launderers and terrorists. HSBC has apologized for failing to meet global standards.
Earlier this month, HSBC added $800 million to its stash of reserves to cover potential expenses tied to money-laundering investigations as well as probes into its dealings with Iran. The bank has set aside $1.5 billion to cover possible payments.