It has taken a staggering $667 million in fines and a strict promise from Standard Chartered, a British bank, to get the regulatory spotlight off of its business.
A settlement was announced this week by the financial regulator in New York state that the company will pay a fine of $300 million fine and will have to stop a highly profitable business activity because it has failed to weed out several types of transaction that often involve money laundering, a form of financial fraud, which is similar to expensive settlements that occurred in 2012. Those settlements, which were done with federal and state authorities, were able to resolve accusations that Standard Chartered was processing financial transactions for various blacklisted companies such as Iran.
The regulator in New York, Ben Lawsky, penalized Standard Chartered for breaking the 2012 settlement. He said that it requires the bank to deal with any compliance problems related to money laundering and the RICO Act.
An independent monitor, which was brought in as part of the 2012 settlement. found in recent months that the computer systems at the bank did not flag suspicious wire transfers that were flowing in from parts of the world that are thought to be in the business of money laundering. The order did not detail how many transactions that the filter did not identify, but someone who was involved in the matter noted that it was many millions of dollars.
The settlement involving Lawsky is not a welcome distraction for Standard, as it is dealing with much lower profits and a poor stock price.
Usually, when banks do not keep their promises with regulators, they go back to business as usual with little problem. But Lawsky is thinking about an effort to double check the transactions of the bank for any signs of laundering money. This could lead to other actions against many banks on Wall Street.
If the bank does not live up to its promises, there should be heavy consequences, Lawsky said. This is especially true in money laundering compliance. This is very important to prevent terrorist acts and to prevent human rights abuses.
In this case, Lawsky’s office traced much of the current problems to a bank in Hong Kong and various branches in UAE. The number of the errors, caused Mr. Lawsky to look more closely at these units.
In this deal, Standard has to stop processing payments in dollars. This is a very important function that is called dollar clearing, and must stop doing it for higher risk retail clients in Hong Kong. The suspension will focus on about 250 clients. It is up to the monitor of the bank to figure out what high risk means.
The bank also has agreed to stop working with high risk smaller clients in UAE. It is not clear how many clients that is going to involve. It has assured investors in recent weeks that its suspension in dollar clearing activities will not really affect financial performance.