Updated: 08/20/2014 19:31 | By Agence France-Presse

Standard Chartered fined $300 mn over laundering controls

New York state's banking regulator has hit Standard Chartered Bank with a $300 million fine and restrictions on its dollar-clearing business for failing to detect possible money-laundering. 


Standard Chartered fined $300 mn over laundering controls

Standard Chartered billboards hang above a bank branch in Hong Kong on August 6, 2014 - by Alex Ogle

The New York Department of Financial Services (DFS) said the British bank's internal compliance systems had failed to detect or act on a large number of "potentially high-risk transactions" mostly originating from Hong Kong and the United Arab Emirates.

The punishment Tuesday came two years after the bank paid US regulators $667 million to settle charges it violated US sanctions by handling thousands of money transactions involving Iran, Myanmar, Libya and Sudan.

A DFS monitor appointed in 2012 to keep an eye on the bank discovered that it had not detected the allegedly high-risk transactions from Hong Kong and the UAE or reported them as it should have, the department said.

"If a bank fails to live up to its commitments, there should be consequences. That is particularly true in an area as serious as anti-money-laundering compliance, which is vital to helping prevent terrorism and vile human rights abuses," said DFS head Benjamin Lawsky.

The department gave no information on the nature of the transactions, or whether or not they proved to involve laundering.

In a settlement agreed with the bank, DFS ordered Standard Chartered to halt dollar-clearing operations for unnamed "high-risk retail business clients" of its Hong Kong unit.

The bank is already cutting business with high-risk clients in the UAE, but will also not be able to process dollar funds through the United States for them.

Its New York branch also is forbidden to take on any clearing or deposit accounts from new customers without the approval of Lawsky's office.

- 'Serious blow' - 

Analysts said the sanctions would have a negative impact on the bank's reputation and international business, even though the fine was smaller than those imposed on other banks previously.

"It's really an oversight on the part of Standard Chartered. They'd already paid a huge penalty (in 2012) and still they installed a system that is useless," Hong Kong-based independent financial analyst Francis Lun told AFP.

"It will create tremendous problems with (some of) their international clients who cannot settle their accounts in US dollars. It will be a serious blow to Standard Chartered group's international business," Lun said.

Hong Kong-based corporate governance expert David Webb, said: "The impact on Standard Chartered is not just the $300 million fine, but the deterrent effect to its clients who are doing business with the bank." 

"They will face an excessive amount of bureaucracy in trying to operate or open accounts," he said.

The action taken against Standard Chartered is part of an ongoing crackdown by New York state and federal authorities on banks, particularly foreign banks with New York branches, for handling money transfers from countries and individuals blacklisted by Washington for political reasons or for their involvement in criminal activities.

In the largest case French bank BNP Paribas agreed to pay $8.9 billion in July to settle charges that for years it knowingly violated US sanctions on Iran and Sudan.

BNP Paribas and other banks fined for similar reasons were ordered to implement stringent compliance regimes to ensure they do not break US rules in their dollar-clearing businesses.

Standard Chartered is based in London but has traditionally done most of its business in Asia and the Middle East.

It said it accepted responsibility and "regrets the deficiencies in the anti-money laundering transaction surveillance system at its New York branch."

It added that it would work with clients in Hong Kong and the UAE affected by the DFS requirements, to minimise disruption.

"The group remains fully committed to Hong Kong and the United Arab Emirates as key markets," the bank said.

Hong Kong-listed shares in the bank closed Wednesday at HK$158.1 ($20.40), down 0.25 percent, while the Hang Seng Index ended up 0.15 percent.

"$300 million isn't a big number... investors will be fine with this penalty," said Tanrich Securities vice president Jackson Wong.

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