India’s anti-money laundering (AML) agency Enforcement Directorate (ED) has reportedly fined Standard Chartered INR1bn ($13.6m) for foreign exchange rule breaches during a local bank deal.
The fine relates to the violation of the foreign exchange management act, which monitors offshore foreign transactions, Bloomberg reported.
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According to ED, the British lender breached foreign exchange rules while working with investors to acquire Tamilnad Mercantile Bank’s (TMB) stake in 2007.
TMB was fined INR170m for similar charges, revealed ED’s penalty order.
In 2007, TMB transferred 46,862 shares to foreign investors GHI, Swiss Re, FI Investments and Cuna Group, without the central bank’s approval.
Some of these shares were then transferred to Standard Chartered’s affiliate Sub-Continental Equities in 2008.
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By GlobalDataTMB used escrow accounts with Standard Chartered to transfer the shares, the Bloomberg report added.
According to the order, this makes the British bank a transaction agent and a lender to one of the said investors.
The bank also acted as a custodian for shares on the deal, ED said.
ED special director Sushil Kumar said: “Senior officials at Standard Chartered saw an investment in TMB shares as an opportunity that might ripen into an eventually larger ownership for the bank.
“Standard Chartered through its affiliate Subcontinental was a proposed and eventually an actual investor in TMB shares to be purchased through the escrow agreement arrangements.”
Standard Chartered, which has been operating for 160 years in India, has about 100 branches in the country.
