Standard Chartered scandal: what is UK bank accused of?

SHARES in Standard Chartered have plummeted in Hong Kong and London after a US regulator accused the British-based bank of conspiring with the Iranian government to launder at least $250bn in breach of American sanctions over almost a decade.

Labelling Standard Chartered a "rogue institution", the New York State Department of Financial Services (DFS) said the bank might have had dealings with Burma, Libya and Sudan, which were also under sanctions.

Standard Chartered, which stands to lose its US banking licence if the charges are proven, has strongly rejected the allegations.

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The DFS alleges that Standard Chartered "designed and implemented an elaborate scheme by which to use its New York branch as a front for prohibited dealings with Iran - dealings that indisputably helped sustain a global threat to peace and stability".

Standard Chartered is accused of engaging in 'wire stripping' - removing data from payments made under the SWIFT international banking scheme, thus preventing US authorities from identifying payments involving Iranian institutions.

The bank even allegedly produced a manual describing how best to process Iranian payments and titled it: 'Quality Operating Procedure Iranian Bank Processing'.

According to the DFS, by 2006 the CEO at Standard Chartered's New York branch was so concerned about the situation that he emailed head office in London saying: "Firstly, we believe [the Iranian business] needs urgent reviewing at the Group level to evaluate if its returns and strategic benefits are... still commensurate with the potential to cause very serious or even catastrophic reputational damage to the Group.

"[S]econdly, there is equally importantly potential of risk of subjecting management in US and London (eg you and I) and elsewhere to personal reputational damages and/or serious criminal liability."

The DFS says Standard Chartered's "obvious contempt" for US banking regulations was illustrated "succinctly and unambiguously" when the group executive director allegedly emailed in response: "You f***ing Americans. Who are you to tell us, the rest of the world, that we're not going to deal with Iranians."

In a statement, Standard Chartered says it does not "believe the order issued by the DFS presents a full and accurate picture of the facts".

It says it "acted to comply, and overwhelmingly did comply, with US sanctions".

The bank adds that "well over 99.9 per cent of the transactions relating to Iran" complied with regulations.

Reflecting the seriousness of the potential penalty facing Standard Chartered - being booted out of Wall Street - shares in the bank fell six per cent in late trading in London yesterday. In Hong Kong this morning, shares in the bank fell 7.5 per cent in early trading.

The Times observes that the accusations will be "extremely embarrassing" for Standard Chartered, which has avoided the allegations of mis-selling, rate-rigging and money-laundering that have dogged its competitors.

Peter Sands, Standard Chartered's chief executive, "is among the most respected of London-based lenders" and has been suggested recently as a candidate for vacancies at the top of Barclays and the Bank of England.