Standard Chartered Bank (SCB), a British bank, has entered into a deferred prosecution agreement and will pay $327 million in penalties and forfeitures after admitting that it violated New York State law by falsifying the records of New York financial institutions and by submitting false statements to its state and federal regulators about its business conduct.
SCB was represented by Samuel Seymour and Nicholas Bourtin of Sullivan & Cromwell in New York.
SCB moved more than $200 million through the U.S. financial system primarily on behalf of Iranian and Sudanese clients by removing — or “stripping” — information that would have revealed the payments as originating with a sanctioned country or entity.
These transactions otherwise would have been rejected, blocked, or stopped for investigation under Office of Foreign Assets Control (OFAC) regulations.
The $327 million resolution includes parallel resolutions of regulatory inquiries, in which the the Board of Governors of the Federal Reserve System imposed an additional $100 million civil monetary penalty, and OFAC issued a settlement of $132 million for apparent violations arising out of the same pattern of conduct.
“For years, Standard Chartered Bank deliberately violated U.S. laws governing transactions involving Sudan, Iran, and other countries subject to U.S. sanctions,” said Justice Department Criminal Division Chief Lanny Breuer. “The United States expects a minimum standard of behavior from all financial institutions that enjoy the benefits of the U.S. financial system. Standard Chartered’s conduct was flagrant and unacceptable.”
Federal officials alleged that despite a detailed risk-rating methodology agreed to by the regulators and SCB, which should have identified all payments involving OFAC-sanctioned countries, SCB failed to disclose that SCB New York was processing billions of dollars of stripped payments for Iranian clients and clients from other sanctioned countries.
Although the vast majority of these payments were legal under then-existent exemptions to the sanctions laws, they nonetheless should have been disclosed under the terms of the look-back agreement and in response to questions posed by the regulators.
This failure to inform was despite the fact that SCB and the regulators had agreed that financial transactions with Iran and other OFAC-sanctioned entities posed a de facto AML risk.
To settle the charges, SCB entered into a deferred prosecution agreement.
Under the agreement, SCB agrees to adhere to best practices for international banking transparency, implement procedures and training designed to ensure U.S. sanctions compliance, and pay $227 million in criminal penalties and forfeiture.
Manhattan District Attorney Cyrus Vance’s office previously has reached deferred prosecution agreements with ING, with a penalty of $619 million in 2012, Barclays for $298 million in 2010, Credit Suisse for $536 million in 2009, and Lloyds Bank, with a penalty of $350 million in 2009.
Within the past four years, five banks, including SCB, have forfeited in settlements approximately $2 billion for their illegal conduct, with half of the funds being paid to the City and State of New York.
“Investigations of financial institutions, businesses, and individuals who violate U.S. sanctions by misusing banks in New York are vitally important to national security and the integrity of our banking system,” said District Attorney Vance. “Banks occupy positions of trust. It is a bedrock principle that they must deal honestly with their regulators. My Office will accept nothing less – too much is at stake for the people of New York and this country.”