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.”