Billy Bambrough asks how the bank’s failure to keep its anti-money laundering obligations will impact its retail customers around the world
UK based bank Standard Chartered has agreed to pay a $300m fine due to oversights in its anti-money-laundering procedures, following a similar charge almost two years ago ($340m) after the bank was accused of scheming with Iran to hide from US authorities billions of dollars worth of transactions.
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This latest charge is a result of the bank failing to live up to its anti-money laundering commitments the New York regulator issued following the 2012 settlement.
Standard Chartered released its end of H1 2014 results in early August, with falling profits suggesting, certainly to those in the consumer press that, the bank is in trouble. The truth though seems far from that, as our own Douglas Blakey argues.
Although Standard Chartered is far from on the rocks, the second $300m charge in three years cannot be ignored and it is very possible that the banks widely dispersed retail customers will be the ones that are left out in the cold.
"If a bank fails to live up to its commitments, there should be consequences." – Benjamin Lawsky, superintendent of the DFS
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By GlobalDataDFS superintendent Benjamin Lawsky claims that the British lender failed to catch millions of higher-risk transactions that should have triggered further investigation. He said the bank failed to detect significant transactions originating from its Hong Kong subsidiary (SCB Hong Kong) and branches in the United Arab Emirates (SCB UAE), among others.
The bank has suspend some of its US dollar clearing activities in two of its biggest markets – Hong Kong and the United Arab Emirates – until it fixes the failings in its transaction monitoring systems.
While the bank has strongly rejected the accusations, both in 2012 and this most recent charge – with chief executive Peter Sands in 2012 agreeing to settle the charges while insisting that the bank had committed only minor breaches of the rules – at some point the bank will decide the losses outweigh the gains in providing banking to certain areas.
HSBC and Barclays have both laid down precedent for eschewing regions that they have deemed to be potentially too costly to operate in, with HSBC taking the measures so far as to be accused of Islamaphobia.
Behind the New York regulator’s decision is the belief that Standard Chartered’s faulty systems allowed millions of suspicious payments to go unreported for years and the only reason the compliance failings were spotted was because of a monitor installed by the DFS in 2012 as part of a settlement which included a $667m fine for violating sanctions on Sudan, Iran, Libya and Myanmar.
With Standard Chartered now well aware the DFS is monitoring their payments and willing to issue fines based on this, the bank will have to weigh carefully the risks involved in continuing to provide banking services to some areas and we may see Standard Chartered be a little more proactive in suspending activities before the DFS makes its move.
