On the eve of a potentially embarrassing hearing with New York financial regulators, Standard Chartered settled the charges of illicitly processing transactions with Iran, paying a US$340m penalty and agreeing to new money-laundering risk controls and greater supervision by the state agency. Although the bank’s shares rose on news of the settlement, they have yet to recover all of the ground lost during in the week since the charges caught the bank, investors and even federal regulators by surprise.
The agreement also raises new questions. StanChart’s initial response to the allegations was defiance, rejecting the “portrayal of facts” by the regulator and claiming that only US$14m in transactions fell foul of the rules on Iranian sanctions, well below the US$250bn in illicit transactions claimed in the regulator’s allegations. However, in the context of previous money-laundering settlements, the penalty looks a downright bargain. In June, ING paid nearly twice as much, US$619m, to settle alleged violations on transactions worth US$1.6bn, less than 1% of the transactions StanChart is accused of hiding from regulators.
With US federal regulators still investigating sanctions compliance at StanChart, more fines will likely follow. In 2009, Lloyds TSB settled money-laundering allegations with the US Department of Justice and State of New York for US$350m in January, followed by another US$217m to the US Treasury in December.
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