April 10, 2019

Standard Chartered Bank to Pay $1.1 Billion to Settle Sanctions Violations Probe

By Samuel Rubenfeld

 

Standard Chartered PLC agreed on Tuesday to pay a total of $1.1 billion to resolve a long-running sanctions probe, reaching settlements with U.S. federal, state and local authorities, and U.K. regulators.

The London-based bank had reached settlements with New York and U.S. regulators in 2012 for violating U.S. sanctions against Iran, Libya and other countries between 2001 and 2007. But violations continued until as late as 2014, according to the agreements announced Tuesday.

Standard Chartered admitted that it had processed nearly 9,500 transactions between 2007 and 2011 worth more than $240 million through U.S. financial institutions for the benefit of Iranian entities, U.S. prosecutors said. The U.S. Treasury Department, meanwhile, flagged $437.5 million in transactions from June 2009 to May 2014 that involved people or countries subject to its sanctions programs. New York State regulators said they found $600 million in U.S. dollar-clearing transactions between 2008 and 2014 that flowed through to the bank’s local branch.

The majority of the conduct took place between November 2007 and August 2011 involving accounts held at the bank’s Dubai branches, including accounts at the branch maintained for a number of general trading companies and a petrochemical company owned by an Iranian citizen, the Treasury said. A former employee of the Dubai branch, identified in court documents as Person A, pleaded guilty in U.S. court to fraud and sanctions-violations conspiracy charges, prosecutors said.

Standard Chartered engaged, at the request of the Treasury and other government agencies, in “a substantial investigation” of the Dubai branch’s relationship with the petrochemical company, according to a settlement document signed by the bank’s regional head and a U.S. Treasury official. The probe started in 2013 and continued for several years, according to the document.

That review included a number of “general trading companies” that sent payment instructions to the Dubai branch via fax while physically located in Iran, according to the document. The probe later expanded into the bank’s Internet and mobile platforms, identifying customers accessing accounts from Iran, Sudan or Syria to initiate unauthorized commercial transactions to, or through, the U.S., the document said.

The bank accepted responsibility for the violations and the controls deficiencies outlined in the settlement documents. “The circumstances that led to today’s resolutions are completely unacceptable and not representative of the Standard Chartered I am proud to lead today,” Bill Winters, the bank’s chief executive, said in a statement.

The bank engaged in significant remediation since mid-2013, prosecutors said, including the comprehensive enhancement of its U.S. sanctions compliance program and major improvements to its financial-crime compliance program. It spent $2.8 billion since 2012 on financial crime compliance, according to the settlement document signed with Treasury.

Once presented with evidence of the post-2007 conduct, the bank provided substantial cooperation with a government investigation, including by producing “significant evidence of criminal wrongdoing by its employees and customers,” prosecutors said.

Standard Chartered was under investigation by the U.S. Justice Department, the Treasury’s Office of Foreign Assets Control, the Federal Reserve, the New York State Department of Financial Services, the Manhattan District Attorney’s Office and the U.K. Financial Conduct Authority.

The federal and New York State agencies will receive $947 million in penalties; the U.K. regulator will collect GBP 102.2 million. Tuesday’s settlement marks the fourth enforcement action against Standard Chartered by the New York Department of Financial Services, the regulator said; the bank has paid fines to the state regulator worth more than $1.1 billion.

Standard Chartered set aside $900 million in the last quarter of 2018 in anticipation of a settlement; it said Tuesday that it will take a further charge of $190 million for the first quarter of 2019. As part of the settlement, deferred-prosecution agreements between the bank and New York and federal prosecutors were extended for two years; they now expire April 9, 2021.

Two former Standard Chartered employees conspired to help Iran-connected customers conduct U.S. dollar transactions through the U.S. financial system to benefit Iranian individuals and entities, the bank admitted. One of the customers was Mahmoud Reza Elyassi, an Iranian national who operated business accounts at the Dubai branch while living in Iran.

The former employees helped Elyassi manage the accounts, conceal their Iranian connections and facilitate U.S. dollar transactions, prosecutors said. They knew Elyassi’s businesses operated from Iran and conducted the U.S. dollar transactions for Iranian interests, helping him disguise his Iranian connections to avoid suspicion, prosecutors alleged.

Elyassi was charged in a two-count criminal indictment unsealed Tuesday in U.S. federal court. He and others registered numerous general trading companies in the United Arab Emirates and used them as fronts for a money-exchange business based in Iran, prosecutors said. The bank’s admissions of the 9,500 transactions related to Elyassi’s companies, prosecutors said.

Kharon research

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