STANDARD CHARTERED TO PAY $300 MILLION IN DEAL WITH NYDFS

(The following is a reformatted version of a press release
issued by the Office of Benjamin M. Lawsky, New York
Superintendent of Financial Services and received via electronic
mail. The release was confirmed by the sender.) 
NYDFS ANNOUNCES STANDARD CHARTERED BANK TO SUSPEND DOLLAR
CLEARING FOR HIGH-RISK CLIENTS IN HONG KONG; PAY $300 MILLION
PENALTY; TAKE OTHER REMEDIAL STEPS AFTER ANTI-MONEY LAUNDERING
COMPLIANCE FAILURES 
Benjamin M. Lawsky, Superintendent of Financial Services,
announced an order today regarding Standard Chartered Bank’s
(“SCB”) failures to remediate anti-money laundering compliance
problems as required in the Bank’s 2012 settlement with the New
York State Department of Financial Services (NYDFS). 
Under the order, SCB will suspend dollar clearing through its
New York Branch for high-risk retail business clients at its SCB
Hong Kong subsidiary; exit high-risk client relationships within
certain business lines at its branches in the United Arab
Emirates; not accept new dollar-clearing clients or accounts
across its operations without prior approval from DFS; pay a
$300 million penalty; as well as take other remedial steps. 
Superintendent Lawsky said: “If a bank fails to live up to its
commitments, there should be consequences. That is particularly
true in an area as serious as anti-money-laundering compliance,
which is vital to helping prevent
terrorism and vile human rights abuses.” 
SCB’s compliance remediation failures were uncovered by DFS’
independent monitor, which the Department installed at Standard
Chartered as part of the 2012 agreement. The DFS monitor’s
review of Standard Chartered’s transaction
monitoring systems found that the Bank failed to detect a large
number of potentially high-risk transactions for further review.
A significant amount of the potentially high-risk transactions
the system has failed to detect originated from its Hong Kong
subsidiary (“SCB Hong Kong”) and SCB’s branches
in the United Arab Emirates (“SCB UAE”), among others. 
In connection with the implementation of its transaction
monitoring system, SCB NY had created a rulebook (“SCB
Rulebook”) with procedures to aid it in detecting high-risk
transactions. The SCB Monitor gathered information and
attempted to test the SCB Rulebook. After that review, the
Monitor determined that the SCB Rulebook contained numerous
errors and other problems, resulting in SCB’s failure to
identify high-risk transactions for further review. SCB
failed to detect these problems because of a lack of adequate
testing both before and after implementation of the transaction
monitoring system, and failed to adequately audit the
transaction monitoring system. 
Under today’s order, Standard Chartered will take a number of
steps, including the following: 
*   SCB NY will suspend its dollar clearing operations for high-risk retail business clients of SCB Hong Kong. Additionally, SCB
has commenced a process of exiting high-risk small and medium
business clients (“SME”) at SCB UAE. If
exiting of the SME clients at SCB UAE is not completed within 90
days, SCB will suspend U.S. Dollar clearing through SCB NY for
those clients. 
*   SCB NY will not, without the prior approval of DFS - in
consultation with the monitor - open a U.S. Dollar demand
deposit account for any customer who does not already have such
an account with SCB NY. 
*   SCB will pay a $300 million penalty; 
*   SCB will provide a comprehensive remediation action plan
with appropriate deadlines and benchmarks; 
*   SCB will appoint a competent and responsible SCB executive
who will report directly to the SCB CEO to oversee the
remediation; 
*   SCB will extend the engagement of the Monitor for two
additional years; 
*   SCB will implement a series of enhanced due diligence and
know-your-customer requirements - such as demanding greater
information regarding the originators and beneficiaries of
transactions - for its dollar clearing operations. 
(bjh) NY 
#<873920.660640.3.13.0.0.76>#
 
 
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