Standard Chartered is in talks to pay $300 million (€224.5m) to New York’s top banking regulator to settle allegations that it failed to identify suspicious transactions despite promising to improve procedures after it was fined for violating sanctions rules two years ago.
New York’s Department of Financial Services (DFS) could announce the settlement this week, people familiar with the matter said.
StanChart will also probably agree to disciplinary measures, such as extending the contract of an independent monitor charged with rooting out dubious transactions.
The current investigation is a follow-up to the bank’s 2012 settlement with US authorities which alleged StanChart violated US sanctions laws that prohibited transactions with Sudan, Iran, Libya and Myanmar.
As part of that $667million agreement StanChart agreed to put in place an independent monitor to evaluate the bank’s adherence to the settlement.
The UK-based bank disclosed the new investigation this month. At the time Peter Sands, StanChart’s chief executive, said the potential violation related to a 2007 update of the group’s post-transaction surveillance systems, which had been “poorly implemented”.
As a result its anti-money laundering checks had failed to flag suspicious or potentially illegal payments, said Mr Sands.
The DFS, led by Benjamin Lawsky, believes millions of suspicious transactions were not reported, although it is not clear whether they were illegal.
The costly settlement would be another blow for StanChart amid growing disquiet among some of its biggest shareholders over the duo who led its rapid expansion during the past decade: Mr Sands, chief executive since 2006, and Sir John Peace, chairman since 2009.
After surviving the financial crisis relatively unscathed and enjoying more than a decade of annual double-digit profit growth, StanChart suffered a downturn in performance with pre-tax profits falling a fifth in the first half of the year.
The penalty of up to $300 million is steep for a follow-on settlement and comes close to the 2012 fine, reflecting Mr Lawsky’s determination that banks that sign up to terms need to adhere to them.
StanChart has had a rocky time with US authorities since the 2012 deal. Sir John irritated regulators when he dismissed the bank’s actions as “clerical errors” rather than “wilful” intention to break rules.
His comments earned Sir John, Mr Sands a summons to Washington, where they were personally reprimanded. – Copyright The Financial Times Limited 2014
