(FT) Standard Chartered is in talks to pay up to $300m (KSh26 Bn) to New York’s top banking regulator to settle allegations it failed to identify suspicious transactions, despite promising to improve its procedures after it was fined for violating sanctions rules two years ago.
New York’s Department of Financial Services could announce the settlement as soon as this week, people familiar with the matter said. StanChart is also likely to agree to additional disciplinary measures, such as extending the contract of an independent monitor charged with identifying dubious transactions.
The current investigation is a follow-up to the bank’s 2012 settlement with the US authorities including the DFS, which alleged StanChart violated US sanctions laws that prohibited transactions with Sudan, Iran, Libya and Myanmar.
As part of that $667m agreement – $340m of which went to New York authorities – StanChart agreed to put in place an independent monitor to evaluate the bank’s adherence to the settlement and to ensure it stopped processing prohibited transactions.
The UK-based bank first disclosed the new investigation earlier 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, Mr Sands said. StanChart and the DFS declined to comment on Monday.
The DFS, led by Benjamin Lawsky, believes millions of suspicious transactions were not reported, although it is not clear whether any of them were illegal.
The costly settlement would mark another blow for StanChart amid growing disquiet among some of its biggest shareholders over the duo who led its rapid expansion over the past decade: Mr Sands, chief executive since 2006, and Sir John Peace, chairman since 2009.
After exiting the financial crisis relatively unscathed and enjoying more than a decade of annual double-digit growth in profits, StanChart recently suffered a downturn in performance with pre-tax profits falling by a fifth in the first half of the year. Its shares have dropped by a third in 18 months.
The penalty of up to $300m is steep for a follow-on settlement and comes close to the original DFS fine in 2012, reflecting Mr Lawsky’s position that banks that sign up to certain terms in a settlement need to abide by them.
StanChart has had a rocky history with US authorities since the 2012 sanctions settlement. Sir John irked regulators when he dismissed the bank’s actions as “clerical errors” rather than a “wilful” intention to break the rules, even though the group had accepted responsibility for breaching sanctions.
His comments earned Sir John, Mr Sands and then finance director Richard Meddings a summons to Washington, where all three were personally reprimanded by US authorities.
Sir John was forced to apologise to investors and the bank’s staff, and admitted his remarks had been “both legally and factually incorrect”.
Jaspal Bindra, head of StanChart’s Asia operations, last week complained that regulators were treating banks like criminals for lapses.
Mr Bindra told the Reuters news agency that “banks have been asked to play the role of policing anti-money laundering . . . [but when] we have a lapse we don’t get treated like a policeman, we are treated like a criminal”.