[Vision2020] Your Friend and Mine, Another Bank

[Art Deco]

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August 6, 2012
Regulator Says British Bank Helped Iran Hide Deals By JESSICA
SILVER-GREENBERG<http://topics.nytimes.com/top/reference/timestopics/people/s/jessica_silvergreenberg/index.html>

Using its New York-based operations, a major British bank schemed with the
Iranian government for nearly a decade to launder $250 billion, leaving the
United States financial system vulnerable to terrorists and corrupt
regimes, New York’s top banking regulator charged on Monday.

The New York State Department of Financial Services accused Standard
Chartered, which the agency called a “rogue institution,” of masking more
than 60,000 transactions for Iranian banks and corporations, motivated by
the millions of dollars it reaped in fees.

Senior management at the 150-year-old bank used the New York branch “as a
front for prohibited dealings with Iran — dealings that indisputably helped
sustain a global threat to peace and stability,” according to a regulatory
order sent to the bank. The order requires the bank to explain the apparent
violations of law in a hearing later this month and justify why its license
to operate in New York shouldn’t be revoked.

The bank said Monday
night<http://www.standardchartered.com/en/news-and-media/news/global/2012-08-06-response-to-NY-State-Department-comments.html>that
it “strongly rejects the position and portrayal of facts” by the
agency.

The Federal Bureau of Investigation said that it had an open investigation
into money laundering at Standard Chartered. In the order, regulators paint
a vivid picture of a cover-up that included the code name “Project
Gazelle,” money flowing to Iran’s central bank, United States executives
warning of “criminal liability,” and a manual that taught employees how to
automate the masking of a rising number of illegal transactions.

The accusations against Standard Chartered come as United States officials
work to crack down on the flow of money to foreign countries, companies and
individuals connected to terrorism, weapons of mass destruction and drug
trafficking.

Beyond the dealings with Iran, the banking regulator said it had discovered
evidence that Standard Chartered operated “similar schemes” to do business
with other countries under United States sanctions, including Myanmar
(formerly Burma), Libya and Sudan.

Earlier Monday, a spokesman for Standard Chartered said the bank was
reviewing its “historical U.S. sanctions compliance and is discussing that
review with U.S. enforcement agencies and regulators.”

But the order accuses senior executives at the bank of suppressing
complaints. For example, in 2006, according to the order, the bank’s chief
executive for the Americas wrote his bosses in London that the transactions
had “the potential to cause very serious or even catastrophic reputational
damage to the group.”

According to the order, the response was hostile, denigrated Americans and
asked: “Who are you to tell us, the rest of the world, that we’re not going
to deal with Iranians.” The department of financial services, led by
superintendent Benjamin M. Lawsky, said it was “impossible to know” how
much of the money might have been used by Iran to finance its nuclear
program or to support terrorist organizations.

Mr. Lawsky said that the department, which examined more than 30,000
internal memos, e-mails and other documents in its nine-month
investigation, will hold hearings to determine any financial penalty.

Standard Chartered is the latest in a series of global banks to be accused
of facilitating illegal flows of money from outside the United States. In
July, a Senate panel issued a report that accused HSBC of being used by
Mexican drug cartels to funnel cash back into the United States, by Saudi
Arabian banks with terrorist ties that needed access to dollars and by
Iranians who wanted to circumvent United States sanctions.

In June, the Justice Department and the New York County district attorney’s
office reached a $619 million settlement with ING Bank over accusations
that it had illegally moved billions of dollars into the United States for
sanctioned Cuban and Iranian entities.

The “apparent fraudulent and deceptive conduct” by Standard Chartered
occurred from 2001 to 2010, the order said, and was particularly
“egregious,” because some of the transactions were being processed even as
the bank was under formal oversight by New York banking regulators from
2004 to 2007.

Standard Chartered, which is based in London, relies for most of its profit
on business in Africa, Asia and the Middle East.

Before 2008, the federal government permitted money to be transferred
through the United States from one non-American based entity to another,
but only after being thoroughly vetted to detect suspicious activity. In
so-called U-turn transactions, a foreign institution routes money to a bank
in the United States, which transfers the money immediately to a separate
foreign institution.

Suspecting that Iran was using its banks — including the Central Bank of
Iran/Markazi, Bank Saderat and Bank Melli — to finance nuclear
weapons<http://topics.nytimes.com/top/news/science/topics/atomic_weapons/index.html?inline=nyt-classifier>and
missile programs, the policy toward Iran changed and the transactions
were banned entirely in 2008.

The order on Monday cited those Iranian state-owned banks as clients of
Standard Chartered.

Standard Chartered disputed the accusations and said that “well over 99.9
percent of the transactions relating to Iran complied with the U-turn
regulations.” Those that did not comply amounted to less than $14 million,
the bank said.

The bank said in its statement late Monday that it had kept federal and
state authorities apprised of the review it initiated in 2010. It said that
it “did not identify a single payment” connected to a terrorist entity or
organization and that it had “ceased all new business with Iranian
customers” five years ago.

The apparent illegal activity stretched back to 1995 after President Bill
Clinton levied sanctions against Iran. At the time, the general counsel of
Standard Chartered e-mailed the bank’s chief compliance officer a plan to
ignore regulations imposed by a division of the Treasury Department,
according to the order.

In the e-mails included in the order, the executives said a memo containing
the plan “MUST NOT be sent to the U.S.,” to prevent prosecution.

That strategy of flouting the United States law was commonplace by 2001,
Mr. Lawsky said. An e-mail from a lawyer to bank executives in 2001 said
that payment instructions for Iranian clients “should not identify the
client or the purpose of the payment.”

One Iranian client, for example, was told to use “NO NAME GIVEN” in
paperwork to transfer money, the order said. That way, the money transfer
could escape scrutiny and “not appear to N.Y. to have come from an Iranian
bank,” a 2003 e-mail from a Standard Chartered official said.

In a strategy called Project Gazelle, the bank devised to forge “new
relationships with Iranian companies” and intermediaries “in oil- and gas-
related businesses,” a memo from 2005 included in the order said.

The bank’s management created a formal operating manual called “Quality
Operating Procedure Iranian Bank Processing,” that showed staff members how
to strip off information that might tie them to the sanctioned Iranian
institutions.

The bank came under scrutiny from the Federal Reserve Bank of New York in
2003 after regulators discovered deficiencies in monitoring its
transactions.

As a result, the bank entered a formal agreement with regulators that it
strengthen its oversight and bring in an independent consultant to inspect
transactions from July 2002 to October 2004.

Even the independent monitoring, by Deloitte & Touche, was perverted,
according to Mr. Lawsky. In 2005, at the behest of the bank, Deloitte
agreed to omit critical transactions from its report to regulators. “This
is too much and too politically sensitive for both SCB and Deloitte. That
is why I drafted the watered-down version,” a Deloitte executive said in a
2005 e-mail in the order.

Deloitte denies it aided the bank. The consultant “performed its role as
independent consultant properly and had no knowledge of any alleged
misconduct by bank employees,” Jonathan Gandal, a Deloitte spokesman said
in a statement. “Allegations otherwise are unsupported by the facts.” In
its last examination of the bank, in 2011, the state’s Department of
Financial Services said it had found “continuing and significant” failures
in complying with bank secrecy and money laundering laws.

Ben Protess contributed reporting.


-- 
Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com
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