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<div class="timestamp">August 6, 2012</div>
<h1>Regulator Says British Bank Helped Iran Hide Deals</h1>
<h6 class="byline">By
<span>
<a href="http://topics.nytimes.com/top/reference/timestopics/people/s/jessica_silvergreenberg/index.html" rel="author" title="More Articles by JESSICA SILVER-GREENBERG">JESSICA SILVER-GREENBERG</a></span></h6>
<div id="articleBody">
<p>
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.
</p>
<p>
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. </p>
<p>
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.
</p>
<p>
The bank <a title="The bank’s statement." href="http://www.standardchartered.com/en/news-and-media/news/global/2012-08-06-response-to-NY-State-Department-comments.html">said Monday night</a> that it “strongly rejects the position and portrayal of facts” by the agency. </p>
<p>
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. </p>
<p>
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. </p>
<p>
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. </p>
<p>
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.” </p>
<p>
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.” </p>
<p>
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. </p>
<p>
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.
</p>
<p>
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. </p>
<p>
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. </p>
<p>
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. </p>
<p>
Standard Chartered, which is based in London, relies for most of its
profit on business in Africa, Asia and the Middle East. </p>
<p>
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. </p>
<p>
Suspecting that Iran was using its banks — including the Central Bank of Iran/Markazi, Bank Saderat and Bank Melli — to finance <a href="http://topics.nytimes.com/top/news/science/topics/atomic_weapons/index.html?inline=nyt-classifier" title="More articles about nuclear weapons." class="meta-classifier">nuclear weapons</a> and missile programs, the policy toward Iran changed and the transactions were banned entirely in 2008. </p>
<p>
The order on Monday cited those Iranian state-owned banks as clients of Standard Chartered. </p>
<p>
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. </p>
<p>
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. </p>
<p>
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. </p>
<p>
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. </p>
<p>
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.” </p>
<p>
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. </p>
<p>
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.
</p>
<p>
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. </p>
<p>
The bank came under scrutiny from the Federal Reserve Bank of New York
in 2003 after regulators discovered deficiencies in monitoring its
transactions. </p>
<p>
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. </p>
<p>
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. </p>
<p>
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. </p>
<div class="authorIdentification">
<p>Ben Protess contributed reporting.</p> </div>
<div class="articleCorrection">
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