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Standard Chartered Settles with New York State for $340 Million (Updated)

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As we predicted, Standard Chartered has settled rather than face an August 15 hearing with Benjamin Lawsky, New York’s Superintendent of Financial Services over Iran-related money laundering charges. The amount agreed was less than he was initially rumored to be seeking, which was in the $500 to to $700 million range. However, as we also indicated, in a “good” settlement, neither side gets what it wants. And given that the Federal authorities were roused by the New York action and are also reported to be negotiating settlements, they will likely have to secure decent dollar amounts so as not to be perceived to be completely incompetent, which would have cut into what SCB would pay to New York. The benchmark here is HSBC’s recent money laundering settlement, which led observers to contend that $700 million or even as much as $1 billion, would be what SCB might be forced to pay for this to go away. Put it another way: if the Feds together don’t get at least as much as Lawsky did after he paved the way, it will prove a complete lack of seriousness on their part.

From the Wall Street Journal:

Standard Chartered STAN.LN +2.74% PLC agreed to pay New York’s top banking regulator $340 million, averting a public showdown and ending a weeklong, trans-Atlantic regulatory drama.

After a harried week of debate, the U.K.’s fifth-largest bank by assets reached a settlement with New York’s Superintendent of Financial Services, Benjamin M. Lawsky. The agreement came eight days after Mr. Lawsky accused the bank of illegally scheming over a decade to hide more than 60,000 financial transactions totaling $250 billion for Iranian clients.

Four other U.S. regulators that have been probing the bank’s actions weren’t part of the settlement. The U.S. Treasury Department, the Federal Reserve, the U.S. Department of Justice and the Manhattan District Attorney’s office have been negotiating with Standard Chartered since 2011 to reach a settlement over its Iran-related transactions.

As part of the settlement, Standard Chartered agreed to install a monitor chosen by Mr. Lawsky’s office to oversee its international transactions. The bank also agreed to appoint its own auditors in its New York office to oversee compliance with U.S. money-laundering laws. The bank acknowledged that the settlement covers $250 billion of transactions that the company handled for Iranian clients.

Note this settlement apparently does NOT cover transactions with Libya, Mynmar, and the Sudan that Lawsky flagged in his order, or at least if it did, the Journal did not mention that. However, given that SCB was handling Iran’s foreign oil sale related payments, it’s unlikely that the transactions related to the other countries the order indicated as troubling would approach the size of the Iran transfers.

Updated: I thought it was a bit weird that SCB would not settle the entire matter, and while Lawsky’s statement is terse, it does suggest all the matters mentioned in the order, which would presumably include the transfers with Mynmar and the Sudan, have indeed been settled. Text of his statement:

STATEMENT FROM BENJAMIN M. LAWSKY, SUPERINTENDENT OF FINANCIAL SERVICES, REGARDING STANDARD CHARTERED BANK

Benjamin M. Lawsky, New York Superintendent of Financial Services, issued the following statement today.

“The New York State Department of Financial Services (“DFS”) and Standard Chartered Bank (“Bank”) have reached an agreement to settle the matters raised in the DFS Order dated August 6, 2012. The parties have agreed that the conduct at issue involved transactions of at least $250 billion.

“The settlement also includes the following terms:

· The Bank shall pay a civil penalty of $340 million to the New York State Department of Financial Services.
· The Bank shall install a monitor for a term of at least two years who will report directly to DFS and who will evaluate the money-laundering risk controls in the New York branch and implementation of appropriate corrective measures. In addition, DFS examiners shall be placed on site at the Bank.
· The Bank shall permanently install personnel within its New York branch to oversee and audit any offshore money-laundering due diligence and monitoring undertaken by the Bank.

“The hearing scheduled for August 15, 2012 is adjourned.

“We will continue to work with our federal and state partners on this matter.”

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111 comments

    1. brian

      To paraphrase Tom Cruise when he walked into a bar of lovelies in Top Gun

      Wall Street is a “target rich environment”

      1. marty

        Let’s take nominations. I nominate Deutsche Bank. as Yves keep pointing out, as long as Khuzami is SEC enforcement chief we shouldn’t hold our breaths waiting for impartial federal scrutiny of his former employer. Sounds like a job for a fearless state prosecutor.

  1. Phichibe

    I’m puzzled by this, but will take Yves’ assessment that it was a win for the good guys. I love this from the NYT writeup

    ” Standard Chartered has maintained that “99.9 percent” of the transactions under scrutiny, or all but about $14 million, complied with federal law and involved legitimate Iranian banks and corporations — not entities that had anything to do with supporting terrorist activities or the development of a nuclear weapon.

    The bank’s defense of its transactions still has traction with other authorities, including the Justice Department and the Manhattan district attorney’s office. ”

    The consent decree makes a mockery of this claim, ($340 mill fine for a $14 mill transgression? get serious) and yet the NYT and the Feds are still peddling this line. I hope the Brits really do have some equivalent dirt on an American bank and decide to go for some payback.

    BTW, I read a truly nauseating piece on Reuters about the head of D&T defending their actions in this case. Seems to me somebody’s just admitted to at best errors and at worst criminal fraud. I think that after breaking up the big banks we need to break up the big accounting firms back to the days of the Big 8 or even more. Ever since Andersen took a bullet to the head the Feds have let the Big 3 skate because no one wants to kill another of the top firms and leave us with a duopoly. THis is the reductio ad absurdem o/t faux-antitrust policy we have had in this country for nearly 40 years. ANother thing we need to thank the University of Chicago school of economics for.

    P

    1. Yves Smith Post author

      That is actually misreporting. SCB agreed it was $250 billion. Reread the Lawsky statement:

      The parties have agreed that the conduct at issue involved transactions of at least $250 billion.

    2. Jim George

      From what I have read, the $250 billion was included all the transactins where key identifying data was stripped. Just the stripping itself is illegal. The $14 million was the transactions that the bank clained would be still be illegal asside from the stripping change.

  2. howard in nyc

    i was hoping for a suspended banking license, but all i know of these matters is what yves tells me. a boy can dream.

    and the proverbial question is now answered; that’s who ben lawsky f#@%!&$ thinks he is!

  3. TK421

    “if the Feds together don’t get at least as much as Lawsky did after he paved the way, it will prove a complete lack of seriousness on their part”

    And what price would they pay for that? Obama’s loyalists would still vote for him even if he blew up Lawsky with a drone attack.

    1. Bob

      No, they won’t, at least not this one. HSBC and SCB are the last straw for me. Screw this administration, they have lost my support and my vote.

  4. Jim

    Didn’t Reagan represent the high-water mark for high-level financial being incarcerated? Even Bush managed to incarcerate his pal, Kenny Boy, and Enrnon’s CEO.

    1. rob

      NO.Reagan wasn’t a high water mark for incarceration.It was just that there were record numbers of people that should have been incarcerated. HE CERTAINLY didn’t do it;”he couldn’t remember”Remember?but, alot of people went to jail anyway…. but not nearly all the crooks…
      after all with an administration who comes into office by making deals with iranian terrorists to NOT release american hostages until ,they get in office after an october suprise…. and then moves on with a vice president Bush who along with casey and jim baker and a cast of imps proceed to join in the looting of the savings and loan banks (which the taxpayers had to bail out to a tune of 500 billion dollars),which can be read about in detail in a book by pete brewton called “The Mafia,the CIA,and George bush”,who was the reporter in houston whose reporting led to the tip of the iceberg of a scandal…(don’t forget george hw bush’s sons niel,and jeb were both owners/thieves/defrauders of two savings and loans that failed…the savings and loan scandal was also partnered in crime with some of those same iranians who helped with the october suprise.Then on our side of the atlantic, they were selling guns and aiding central american dictators.Actually, they were selling drugs,and giving the guns away.To follow the crack epidemic of the 80′s,you see that ollie north and those guys were protecting the cali and medelin cartels, and supplying gangs like the bloods and the crips… all to be hidden by john kerry till the 40 years is over ;as he was the prosecutor in the senate investigations of the iran contra affair.skull and bones to the rescue.then there was iraqgate, when bush and friends were helping saddam steal 5 billion from american banks thru italy… which was probably just a payoff since that was after rumsfeld was delivering guns and money and chemical weapons in ’84,and richard perle was protecting iraq from censure in the UN for gassing their own people and iranians in ’87/’88.But it was GHW bush, who in 1989 allowed a maryland co. to sell anthrax to saddam for the last time.(That I know of).
      So to imply reagan’s administration was tough on crime is just wrong. They were just seriously corrupt and got caught doing so many things…. Of course reagan might have been as senile as he pretended to be, and it was GHW Bush, behind it all.After all, the the bushes were having dinner with hinkley’s parents just nights before the shooting..They are old friends…. oh yeah… they had dinner with lots of people. and did business with lots of people…. after all, the bin ladens were family friends too,as well as the saudi royal family.

      And the George W Bush administration wasn’t tough on crime…What drug have you been on for the last 12 years? and Ken lay wasn’t convicted. His alleged death prevented that.And enron didn’t go away,they changed letterhead.the 2000 electric energy scandal where enron and duke energy were complicit in rigging rates to rip people off went right thru till its end. NO one stopped them. Along with the 2004 LPG manipulations by BP and others who manipulated the price of gas, and got away with it. Nothing happened to any of those co’s ,despite haveing been caught on tape ,literally,conspiring to commit fraud and rig prices on those “free markets”,then there was the gasoline manipulations that started after 2005, and continue to this very day…still, no slap on the wrist(shame on you too Obomba)But that even pales in comparison to allowing the 9/11 attac to happen. and even if people want to debate that point,based on their gullability.They have to admit that Bush and cheney war complicit in starting a false war in IRAQ,with trumped up evidence(even someone out of the loop like myself knew was false BEFORE bush invaded),where can we even begin to enumerate the treaties,laws,customs,traditions,rights that have been violated since the days of bush II…Shame on you too OBOMBA..
      Jesus, This list is too long… It is dizzying to contemplate the damage done to our nation under a hack like regan and a couple of bastards named BUSH… throw in a couple of clintons and an obama……da da da da and we have today…..

      1. enouf

        A+

        Love

        p.s. I seriously considered breaking this (your post) up into its constituent proper Paragraph form, adding a blank space after each sentence ending ‘.’, revising clauses and phrases a tad: to allow for better flow of reading, correcting for proper capitalization of letters as needed, adding accents as needed, and generally just grammatically cleaning up .. and reposting it …but it’s good enough as it is.
        ;-0

    1. Jim George

      It is likely that New York officials wanted to get their fine in line ahead of any Federal settlement. In addition to NY laws, a number of Federal laws were violated by use of transactions with identifying data stripped out, including the Patriot Act which passed in the wake of 9/11. While the Feds have been slow and quiet in their investigation, it is highly unlikely that no Federal charges will be brought or no Federal settlement reached.

  5. Warren Celli

    Another good guy hero, “balls of steel” Lawsky folds like a cheap wallet. The SCB gang rape continues but the ‘good guys’will now monitor condom use.

    Deception is the strongest political forec on the planet.

      1. Warren Celli

        Yes, thanks Tawal, good article, nice to see election boycotts finally getting some well deserved press. But they do need to be organized and proactive as I have outlined in the past.

        Great concept to take viral RIGHT NOW!

        Deception is the strongest political force on the planet.

      1. tawal

        In the spirit of LBR’s frequent love fests for dissenting political figures: BOYCOTT THE LEGACY PARTIES, VOTE GREEN OR ABSTAIN!

        1. Historicaecon

          Half the eligible voters in this county boycott the election already. Look where that’s got them. Voting is still the most important right we have left.

  6. Thomas E

    Words fail me.

    So, the punishment for breaking the law is a fraction of the profit generated by the offence? How can that be justice?

    1. Foppe

      What, you don’t think they only charged .136% in transaction fees, and that paying back the money earned is enough? I’m shocked.

  7. YankeeFrank

    Ah justice! If a big bank were found to be providing transit for thousands of babies to a baby-slaughtering factory the fine would be nominal with no criminal prosecutions. There is nothing these criminals will ever be held accountable for apparently. I mean, the drug cartel money laundering alone has to be responsible for thousands of murders: without their money being laundered the cartels would cease to operate. And yet the DEA is going after the little guys while the entire show is enabled by the banksters. If I were a DEA agent that actually believed in my mission, I’d start targeting these banksters. Alas, the mindset of the police state thug allows little capacity for questioning “the mission”. And the longer this lawlessness continues the more entrenched the criminals become.

    1. psychohistorian

      YankeeFrank said: “And the longer this lawlessness continues the more entrenched the criminals become.”

      Accumulated private ownership of property and ongoing inheritance are the rules enabling the global inherited rich to be behind the lawlessness we are experiencing. These tenants of our social organization are rarely discussed and yet they are obviously the keys to power for the global inherited rich over the past few centuries.

      It seems obvious to me that this element of our social organization is way past need for structural change. It is now becoming obvious also that civilization is and will collapse from elitism before these tenants can change.

  8. Paul Walker

    The State of New York just said that providing material assistance to a “hostile force” will cost you a penny in toll. Hell, even Mel Brooks managed to make it a dime.

    Toll Booth in Blazing Saddles: http://youtu.be/SbWg-mozGsU

    1. Fíréan

      A penny ?

      0.136 % is considerably less than a penny on the dollar.
      (if it is $340,000,000 fine on a $240,000,000,000 worth of illegal transaction).
      And no one gets to answer for it ?

      1. Yves Smith Post author

        You are confusing transaction value with the amount SCB earned, which was vastly less.

        1. Foppe

          So they charge less than .136% in total fees for conducting illegal money transfers of this total magnitude?

        2. Fíréan

          One can consider the fine relative to the size of the funds illegaly transferred ? Rather than relative to the banks ( middleman’s )profits on the transactions.
          If the fine were to be passed on to, or included in charges, to the customer then this is a miniscule amount, payable to NY authorities relative to the amount being “laundered” (transferred).

  9. mad tinfoil hatter

    What do the national security departments think about a bank handling money that it’s officially not supposed to be handling? Did they learn of this only now? What are they saying? Or what are they not saying?

    In the absence of transparency, this is a speculation-rich environment.

  10. M. Black

    Question: I don’t know how it works, but the mention of transaction fees made me wonder if in this money-laundering scheme, or in such schemes generally, does the bank involved collect not only transaction fees and charges, but also some form of interest by way of having large sums of money at its disposal for some interest-bearing period of time, however brief?

    1. Ms G

      You bet. It is big business, the likelihood of getting caught minuscule, and the penalties if caught — laughable, as evident in this Standard Charter case.

        1. Ms G

          I stand corrected by Dannyboy who worked in the field. See his new comment(s) below. Premium fees normally charged.

  11. Karl

    Hang on, didn’t I just read ?

    Are the regulators only in business to collect fines – to fund investigations – to collect fines…

    Oh, a regulator is not a prosecutor? So where are they?

      1. Joe

        It is an extortionate way to enforce the law. I don’t even see how New York has jurisdiction over the Justice Dept on these money laundering issues, or how Lawsky is permitted to negotiate a cash settlement with no apparent involvement of the justice system. this is all just nutso.

        1. Yves Smith Post author

          Please educate yourself rather than spout uninformed views. You clearly did not read his order. 6 of the 7 violations of law were NYS laws. In addition, the charge he filed with respect to Federal law was narrow and fell within his ambit.

          SCB’s New York branch is licensed in New York. That’s what gives him the authority. See here for more details:

          http://www.nakedcapitalism.com/2012/08/federal-regulators-trying-to-leash-and-collar-standard-chartereds-nemesis-benjamin-lawsky.html

  12. Milton Arbogast

    They certainly did fold like a two dollar suitcase. Lawsky must have so had the goods.

    What it does is make Treasury, the Federal Reserve, and the SEC look like criminal coddling, on-the-take, penny ante, bought and sold, spineless cretins. And in this case appearances are not deceiving.

    I hope that message is not lost.

  13. acmerecords

    I thought under NDAA-2012 that ‘folks’ who consort with ‘terrorists’ are to be renditioned to the most distant Gitmo-Gulag that the US military operates for torture & to be held without being charged for eternity…just ’cause the POTUS sez so

    oh…my bad : that’s only for journalists, professors and protestors (hedges, chomsky & me)

    tawal’s article suggestion is apt – also see, at that same site (counter punch), ‘Why Voting for Democrats Doesn’t Help Working People’

    support this system to your own peril my friends

    1. OpenThePodBayDoorHAL

      We have become a nation of men, not of laws. Anyone who cannot fathom just how frightening that is should get educated. Yes I believe NDAA, the law of the land, a land whose highest authority is now the US Military (in case anyone missed the declaration of martial law), calls for anyone aiding “terrorists” in any way to receive the most heinous unconstitutional punishments, up to and including murder at the personal behest, choice and selection of our Basketballer-in-Chief. Perhaps Hilary should show up next in his disgusting little notebook of the faces-to-be-murdered-this-week, since she has recently provided Stingers to al-Qaeda in Syria.
      In the meantime banks like StanChart get little wrist slaps. This has become unbelievably monstrous…and will meet a monstrous end IMO. How did we lose our freedom and our country? “Slowly at first…then all at once”

  14. Shizel

    get away with drug laundering, treachery and the usual fraud for a few pieces of gold. gottaloveit

    1. Yves Smith Post author

      Um, SCB claimed they had only $14 million of transactions out of compliance and were initially willing to pay only $5 million.

      1. Brian

        So they were willing to pay over 33% of their out-of-compliance transactions, and NYS settled for 0.13%?

        Someone needs to be in jail and it could be their corporate charter. If NYS won’t do it, the Feds definitely won’t.

        NYS just taxed “illegal” transactions instead of punishing them.

        No good words can be said about this.

      2. DANNYBOY

        Yves,

        This is that rare occasion where we disagree.

        “Um, SCB claimed they had only $14 million of transactions out of compliance and were initially willing to pay only $5 million.”

        I worked at The Poster Child for Money Laundering. Management initially claimed that THEY HADN’T LAUNDERED AT ALL”
        After the NoN-Prosecution Agreement was signed, the next case BROUGHT IT ALL OUT.

        Management’s Offer NEVER HAS ANY BASIS IN REALITY.

        After 30 years on Wall Street, I CAN, WITH CERTAINTY SAY, THAT THE CRIMES ARE OF A MAGNITUDE GREATER THAN REPORTED.

        1. psychohistorian

          Of course the crimes are a magnitude larger than reported.

          The estimated annual illegal drug trade is 400 billion, plus. Standard Chartered is getting nipped for less than one years annual sector gross. You gotta know that all that money gets laundered back in some old way…like by a financial SERVICES organization….the customer is always right…… at some cost.

          The crash can’t come soon enough. The ongoing sickness of our competition focused society under the control of the global inherited rich is a poor reflection on humanity’s “advancement”.

          1. DANNYBOY

            The revenue from Money Laundering fees serves as the basis for Management Bonuses.

            The fines payable for Money Laundering come from the Shareholders.

            Is there any incentive for Management to change?

            P.S. And Yves, the last time we disagreed was in your hypothesis of Mike Bloomberg’s presidential candidacy, when we spoke together here on the UWS. I helped Neil Fabricant set that record straight (to hell).

            Regards and keep going!

            Expose the Truth.

          2. Ms G

            These 2 points:

            – ML proceeds pay for Management Bonuses

            – Shareholders pay penalties for ML

            Are All Any of Us Need to Know or Understand about this “Space.” As if anybody in office is going to seriously mess with this system . . .

            Thanks Dannyboy.

  15. scraping_by

    “· The Bank shall pay a civil penalty of $340 million to the New York State Department of Financial Services.”

    While a rape of the innocents (OWS protesters get stomped for telling the truth; banksters get billions for breaking the law) question is — who gets that cash?

    If it’s sent up to the NY Treasury to cover Cuomo’s tax breaks and giveaways for his rich friends, it’s pissing in the wind.

    If Lawksy and Friends now have a working nut to build a few real life cases, the next few months might get interesting.

    We can only wait and see.

    1. MichaeC

      Who gets the cash?

      NYS Dept of Financial Services, not the FEDs.

      Not a bad move for Cuomo/Lawsky. They won’t be starved for funds or have to beg Federal appropriators for permission or funds to prosecute. Hell, they won’t even need to coordinate with the Feds to enforce NY Banking laws with a few more of these under their belt.

      I think,(correct me here) all the other enforcers would have to turn the fines over to the Feds and go back to begging that pro-financial reform House for more to continue their good works.

      A++ move, Lawsky.

  16. Greg R

    All very Cuomo-like: an expression of outrage, followed by managed press coverage…all ending with a fine paid out of petty cash.

    Do I have any faith in Treasury, the Fed, DOJ or the Manhattan DA?
    No.

    1. DANNYBOY

      Add The New York State Department of Financial Services (“DFS”) to your list now.

      I’ve contacted the Superintendent several times now. He won’t try the Cases that need to be made.

      Just wants his PR glory and no more.

        1. DANNYBOY

          no

          No, because Confidentiality and non-disparagement agreements are incredibly powerful tools for companies to keep the truth from coming out about their bad acts. You also can’t tell anyone that you the non-disparagement requirement exists.

          1. Ms G

            Also, if there was an investigation and a resolution, I don’t think a regulator like DFS is entitled to hide that. They can tactically decide not issue a press release, but the resolution of cases on their docket must be (I believe) public record — hopefully on their website but, otherwise, in poor-man-world’s “public record land” (i.e. “on file at the office” viewable per [burdensome procedure to make appointment, pay fee, etc.”)

  17. Ms G

    It says something about how low we have sunk that Lawsky’s pitiful $340 million fine on $250 billion in money laundering (for Iran no less) is viewed as “better than nothing.” Because “nothing” is what DOJ was ready to settle for. (See below, excerpt from NYT article of 8/10/12 http://www.nytimes.com/2012/08/11/business/standard-chartered-case-casts-a-chill-over-the-industry.html.)

    It is a little like being stuck in the legacy-party cage and thinking about voting as an exercise in flipping a coin to chose between evil and evil. Or in the case of Lawsky vs. DOJ, between waving noodles vs. handing out “exemption from laws” cards to banks.

    —– The money quote is at the end of the below cited passage from the NYT article, but its full significance only pops if you read the preceding 2 paras. ——–

    “The banks are not the only ones caught off guard. The Justice Department, which is investigating Standard Chartered, was on the verge of concluding that virtually all of the bank’s transactions with Iran complied with the law, according to current and former authorities, who, like others interviewed on the matter, declined to be identified.

    At meetings over the last couple of weeks, the officials said, momentum was building to not pursue a criminal case against the bank. Also helping Standard Chartered’s cause, the officials said, was the bank’s genuine cooperation with authorities. It has been providing data on years of transactions to the authorities since 2010.

    “There was not much there there,” one of the officials said.
    =========

    Afterthought.

    Standard Charter pays pennies on its international money laundering extravaganza with current US “public enemy #1″ and keeps its license to do business in New York State.

    Meanwhile, from last September, peaceful protesters and journalists participating in OWS activities were stomped, arrested, criminally charged, jailed, fingerprinted, placed in national security databases and pepper sprayed by our newly-militarized New York City Police Department for engaging in legal conduct. Entire public spaces have been walled off to prevent more such legal conduct. And NYPD’s ominous Surveillance Crane remains in place at Liberty Plaza.

    This is our world, until we change it.

    1. MichaeC

      The WSJ reports that:

      We’re told by other law enforcers that roughly $300 million in transactions over the course of a decade were illegal. This is higher than the bank’s public claim of only $14 million, but a tiny fraction of the amount in Mr. Lawsky’s initial accusation. So far the illegal transactions also don’t appear to have had any ties to terror or weapons”

      http://online.wsj.com/article/SB10000872396390444772404577587293183192290.html?mod=googlenews_wsj

      In that case, if only $300m was technically illegal, the fine doesn’t look so shabby.

      However, if the entire $250 billion was illegal, then this is a pittance.

      But, according to the NYT

      “In the weeks leading up to Mr. Lawsky’s move against the bank, the Justice Department was on the brink of deciding not to pursue criminal charges, after concluding that virtually all of the transactions with Iran had complied with United States law, current and former authorities said.”

      http://www.nytimes.com/2012/08/15/business/standard-chartered-settles-with-new-york-for-340-million.html

      So the entire episode was set to be swept under the carpet.

      SC shares have lost 15% of their value and their Iran profit center is going to be shut down. I can live with passing the losses on to shareholders. Gearing a 350m fine to produce a socially good outcome, while shaming the Fed enforcers, doesn’t look like such a bad trade to me.

      1. Ms G

        Lawsky’s official press release refers to $250 billion in illegal transactions. Some justify the $340 million fine as “respectable” if seen as a percentage of the “profits” Standard Charter made off the inherently illegal transactions. As the NYT article I quoted pointed out, according to the Feds, the total illegal transactions was something close to zero. I have to look at the sentencing provisions for the statutes that frame the fines in the Lawsky settlement to figure out how penalties/damages are supposed to be calculated for the violations at issue.

        One thing is for sure, though. Under the federal criminal money laundering statutes, jail sentences of up to 10 years per transaction are authorized. It will be interesting to use the facts uncovered by Lawsky’s regulatory investigation to determine whether on those facts alone a federal criminal ML charge could be drawn — only as an academic exercise, of course.

        1. DANNYBOY

          Does ANYONE BELIEVE that there were $250 Billion in Prohibited Transfers?

          I worked in this field, so I’ll explain: annex an additional zero to the amount admitted, and you’re getting closer to fact.

          The other fact – that no regulator can identify the Illegal Transfers – is the most worrying part of this mess.

      2. Ms G

        Adding. WSJ article appears written to so as to demean Lawsky by painting him as an hot-headed anti-finance prosecutor and his actions in proceeding against SC as “just not cricket.”

      3. marty

        I agree with Yves and MichaeC. In the world in which we actually live (as opposed to a just one), the settlement is a pretty good outcome. I was betting that lawsky would cave under the pressure from the Feds – but he didn’t in one important respect: he didn’t let the Justice Department’s attempted whitewash succeed. At least this is one instance in which the perps once caught red-handed (although not going to jail) at least had to admit that they actually did what was plainly obvious to anyone paying attention to the facts. If we had more outcomes like this in the realm of mortgage fraud prosecutions, the civil bar would be able to get more recompense for victims (homeowners and pensioners, if not taxpayers and citizens.)

  18. avg John

    Were bank executives and their family’s personal accounts audited for unusual deposits over the relevant time frame? Do the executives at least have to return part of their past bonuses?

  19. Hugh

    Was there any mention anywhere of what kind of fees and profits SCB made from laundering the $250 billion? What would the fees normally be on such transactions? What premiums might Iran have paid on top of these for the laundering? Inquiring minds would like to know.

    1. Ms G

      Iran may not have paid any “special fees,” but Standard certainly go the use of large pools of cash to go betting and investing for its own account. So the float value by itself would be immense to SC. While the fees are especially attractive to the banks because they are a sure thing, getting access to free kajillions to play the derivatives, commodities, and god knows what else markets is probably value added enough on top of the regular fees.

      Just speculating, of course.

    2. DANNYBOY

      Having worked in Treasury Services at the larger payments clearer in the world, I can assure you that the Iran Transfers had a higher fee than any other on Standard Charter’s fee schedule.

      That’s how things were priced for Russia.

      1. Ms G

        Interesting. Was the extra fee labeled as “premium for international” or as “special” customer . . . argh.

        1. DANNYBOY

          Ms G,

          You are on fire!

          If you have had a chance to read my latest response to your question, you’ll know that a subpena needs to be issued for this stuff to get out.

          1. Ms G

            Well, as someone else pointed out the usual fee for ML’g (depending on risk and the relationship of the parties, cough, co-conspirators), runs between 0% and 15%. In the matters I worked on the median hovered between 5%-15%. So it would be interesting to know if banks used the benchmark in the “illegit” ML trade to price fees in their, cough, Bank Laundry Operations.

            As to your response above, regarding confidentiality and nondisclosure agreements, unless a person is concerned about their own privacy, there is nothing preventing that person from publishing allegations that were brought to a regulator.

          2. dannyboy

            Ms G,

            That is bound by the Non-Dispargment.

            Better that I stick with the legal advice of family (including former head of major Wall Street Law firm and current partner on The Street). You know how miffed family gets if you don’t follow their advice.

    3. Bobok

      “What would the fees normally be on such transactions?”

      Good question. From what I’ve seen, reported fees for money laundering services range from zero to fifteen percent. It depends on the risks involved with the service provided. Now that the risks are understood, setting a price should be much easier. How much would you charge?

      1. Doug Terpstra

        Assuming the take is low, say 5%, that’s $12.5k billion in plunder. So in a very conservative case, the cost of business fine amounts to 1/3 of 1% of the booty — a killing for criminal banksters, and zero deterrent, merely a PR exercise for the unwashed. Of course we may safely assume Iran would have paid a premium for this, so the COB fine is almost certainly less than 0.1% of the loot. But we promise not to do it again … at least not thru the end of the month!

        In the end Lawsky has performed spectacularly for the 0.1%. Everyone looks good on this, except of course that nuclear-terrorist rogue state threatening US/Israeli full spectrum dominance. I love it when a plan comes together!

        1. Ms G

          DP, thanks for doing that math. Most illuminating.

          I’d love to see the screen shots at SC that show the percentage fee assessed on each of the 60,000 transactions. Would that show up on the customer’s monthly statement?

  20. Ms G

    Given what the unnamed DOJ sources told the NYT for its 8/12/12 article on Standard Charter (they were gearing up to declare “no case to answer” because there was “no there there”) it seems unrealistic to bank on DOJ exacting additional settlement money from Standard Charter. Nor would I bet my paycheck on meaningful action by Cy Vance, New York’s D.A. who was (like DOJ) “still investigating” when Lawsky announced he was ready to pull the trigger. Vance definitely “plays cricket” with his Fed counterparts.

  21. Aquifer

    I have to admit – considering that the penalties that could have legally been imposed were impressive, it does look as though these guys got off easy – they keep their license and are free to go their merry way.

    Frankly the image i get of regulators these days is one of shakedown artists – “Pay me these bucks, and i won’t break you legs …” – like protection money – “Pay me these bucks and you get a get out of jail free card …

    And now we can put this all away …. “Next!”

    1. DANNYBOY

      It gets worse. I expect that the deal includes a Non-Prosecution Agreement protecting the Senior Executives.

      The Criminals are now rich as Crocuses (in the Spring)

  22. bob

    The more I look at this, the more it stinks.

    Cuomo’s (former, lol) right hand man is now the top cop on the beat?

    If it’s anything like Cuomo’s AG term, lots of flash, not a lot of substance.

    It looks like a $340 million dollar shake down. Not that they didn’t deserve to pay much more, but to this guy? In this manner? It’s hush money.

    http://www.dfs.ny.gov/about/history.htm

    As of October 3, 2011 the New York State Banking Department and the New York State Insurance Department are abolished and the functions and authority of both former agencies transferred to the New York State Department of Financial Services.

    Where is the money going?

  23. vlade

    It ended up as I expected, and I believe that actually both parties got more or less what they wanted (if they had any realistic assumptions).

    On DFS side they got large settlement and admission of wrongdoing – which is much better than if they fought, as I believe because of federals dragging their feet it’s very likely they would not be able to take away the clearing ops, which would be a major embarassement to them.

    On SC side, they got it to go away quickly, and set up precedent for settlemnt with Feds (so the total is going to be about 900m-1bn I guess). That’s two years of US/UK/Europe profits. Not too bad.

    Moreover, settling quickly makes it easier for them to claim they are now better and more responsible – if they fought, they reputation for “honest” bank would be bet on them being right and DFS wrong (which even from the little of evidence I saw was impossible). There’s damage, but not irreparable (and I doubt that even emails showing “who are the f*king Americans to tell us what to do” will do them much damage in Asia…)

    1. DANNYBOY

      Of course both parties got what they wanted. That’s how deals are done.

      By the way, neither of those parties gives a shit about anyone else, including you or me.

      How’s that deal feeling now?

  24. Conscience of a Conservative

    The model where banks settle and nobody faces individual liability just means the bank will break a new rule in the future, stock holders will pay the penalty and management along with key executives will live another day to collect bonuses off the next scheme. Very broken model.

    1. DANNYBOY

      Sometimes it just more Cost-Effective to break-the-rule-and-pay-if-ever-caught, than to buy-the-laws-that-bankers-need.

      It’s an Analysis that Banker’s perform daily. Sort of their decision tree.

      1. Ms G

        It also looks increasingly like a feature-not-bug of the enforcement system (severe statutes and punishments; pliant/non-existent/kabuki prosecutions or regulatory actions).

        1. Aquifer

          This pusillanimous “enforcement”, which i suppose is supposed to impress us with the ability of gov’t to “go after the bad guys”, seems to me much more likely to increase cynicism – pass a law with a penalty so that you can use it as leverage to get companies to fork over some bucks so that they can carry on business as usual – literally, a protection racket …

          But what do you expect from a state that collects billions in a stock sales tax each year, then immediately rebates it back to brokers and traders, while gutting public sector workers jobs and bennies.

          Bunch of sick puppies here ….

          Gotta admit, i was a bit surprised, I thought Yves might rip this up more than this, considering what could have been done …

      2. Aquifer

        Aha – so “the market” works after all – in the competition between legislators and regulators for bucks, the decision for the “customer” is which one is cheaper to buy ….

        And the corollary, in the race to the bottom competition among regulators of various levels, – the early cop gets the drop …

        i am SO glad we let The Market dictate the direction of the race, the rules for running it, and the prize at the end …

        1. Ms G

          Yes, it’s just not the Market we were raised and groomed to believe in! “Early cop gets the drop” = wins the internet.

        2. DANNYBOY

          Money now rules every institution in the USA.

          How’s that working for us now?

          This time around, “money really is the root of all these evils”

          Time to try something better.

          1. Aquifer

            This being the case, and fact that it is not working out well at all, why do we keep insisting, in various and sundry ways, TINA?

          2. Ms G

            Well, for me it’s come down to just not being able to pull the lever for evil instead of evil. The spiritual hangovers from getting so excited and then so dreadfully let down with Clinton and Obama — never again.

  25. Susan the other

    Something tells me that all of Lawsky’s “matters” have not been taken care of as we might assume from the wording in his letter. Iran was the big issue because we are busy embargoing them. We are not going to go to war with Iran, we are just going to strangle them. I don’t think this story hangs together and I don’t think Standard Charter was the only rogue. I don’t understand why the Feds chickened out and let Lawsky do it. Don’t they have a higher jurisdiction here? And since we all know the recent fate of Iran, Libya and the Sudan, we must wonder what is going to happen soon in Myanmar. I guess I don’t understand how the Iran laundry ever became news in the first place – it could have been handled quietly.

    1. Aquifer

      Sto,

      Methinks that Yves observation the other day in an earlier story about this may well be a missing link of some sort, though i am not exactly sure yet how it all works out – but that link is the politics of the situation …

      So what does Lawsky/Cuomo, get out of this – in a follow the money line of thought, who benefits and who loses? Is there need/desire for bucks coming from contributors who hate Iran? Is there need/desire for bucks from banks who are rivals of SC?

      And i still haven’t quite figured out how Cuomo’s guy “embarrassing” Obama’s guys helps either one (can’t help wondering if there isn’t a Clinton, or 2, in here somewhere …)

      1. Ms G

        Tinfoil Hat Gallery’s $.02 on what’s “really” going on and cui bono.

        Cuomo gearing up for 2016 presidential, Iran Laundry = splashy display of “Strong on Middle East Issues” aimed at Jewish vote, t-ing up imminent start of fundraising for 2016. (This would explain why he doesn’t mind “pi**ing off” Obama and the Feds.)

        There are just way too many international money laundering cases that Lawsky could have been working on, and way too many non ML cases involving major bank frauds too. There is no way Iran Laundry was not selected for its many useful purposes (having little to do with serious policing of money laundering for the enemy).

        1. Aquifer

          Yeah, that makes sense up to a point …

          It has seemed to me since at least ’08 that intra Dem rivalries were about control of the DLC or corporate (controlling) arm of the party (the “left wing” hasn’t been in the running for a looong time). So how will this play out in ’16?

          If you are correct – it would appear that there is a split, a Cuomo wing, and an Obama wing (as there was an Obama/Clinton battle in ’08). Wonder if that is because Obama’s crew is lining up behind Hillary, Cuomo’s biggest potential rival, ISTM. And the battle lines are being drawn even before the ’12 election! Cuomo will “support” Obama in ’12, but he is sending a message now, “Don’t “f” with me, man!”

          This financial game IS politics, and all politics is personal ….

          1. Aquifer

            Ms G,

            Ah, but is Obama in the Clinton camp, that is what i am wondering … Biden is a cypher, IMO – don’t think he will be in the running in ’16, but you never know …

          2. Ms G

            Who the heck knows! For all we know, there’s some Third Way cauldron being cooked up at the Hamilton Institute, Gstaad, and Amelia Island. At this point, this is all just inside-baseball minutia — they are all kleptocrats and none of them ever represented me, or ever will. So, I will keep up by selectively following a talented Virgil like Lambert, but do little proactive gumshoeing on my own!

    2. DANNYBOY

      After travel in Myanmar I can say that, for me, the greatest discovery was THAT THERE ARE NO BANKS. Arranging for money is one of the greatest adventures you can imagine. And remember, a week’s needed local currancy would fill my backpack.

      Ah, the joys of travel.

    1. Aquifer

      uh,oh, here we go …

      Thanx for the “heads up”!

      Rats, I had some more, but i will refrain :)

      1. Ms G

        Lambert – thanks for the heads up! Have to run — hide gear + works under the floorboards and spread out some Archie comics and Bazooka bubble gum boxes on the shelves. Voila. All legit now. Phew.

  26. Schofield

    Cynically I wonder how long Banksters being a source of free money for government will last? It’s getting to be like stealing candy from a baby!

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