Standard Chartered Plc may have to pay as much as three times more than the $340 million it was fined by a New York regulator to settle all the probes by regulators into its transactions for Iranian clients.
The bank may have to disburse a total of $1 billion as regulators including the U.S. Treasury, Federal Reserve, Justice Department and Manhattan District Attorney negotiate settlements with the bank, according to Simon Morris, a regulatory lawyer at CMS Cameron McKenna in London. Cormac Leech, an analyst at Liberum Capital, put the total cost at $700 million.
Benjamin Lawsky, head of the New York Department of Financial Services, accused Standard Chartered on Aug. 6 of helping Iran launder about $250 billion in violation of federal laws, threatening to remove the London-based bank’s license to operate in the state. That would have hurt Standard Chartered’s ability to process dollar payments for clients in Asia and reduced earnings by about 40 percent, according to Chirantan Barua, an analyst at Sanford Bernstein Research in London.
“This is not over,” said Simon Maughan, a financial industry strategist at Olivetree Securities in London. “But their license is now safe. They have admitted to a technical infringement of the rules. The minute they admitted that, they had to settle.”
The stock climbed 56.50 pence, or 4.1 percent, to 1,426.50 pence in London trading today for a market value of about 34 billion pounds ($53 billion). The shares are still about 9 percent below their Aug. 3 close, the last day of trading before the probe was announced.
The bank still faces federal probes over allegations it helped Iran funnel money through the U.S.
Regulators including the U.S. Treasury, the Federal Reserve Bank, the Justice Department and the Manhattan District Attorney declined attempts at a global settlement, a person familiar with the matter said yesterday. September will be the earliest such a global deal is possible, said the person, who declined to be identified because the matter is private. The regulators said in statements they are working with their counterparts to complete to the probe.
“We would expect the other regulators to settle in due course, and the fines may be material, but we think the aggregate cost will be below $1 billion,” analysts led by Amit Goel at Credit Suisse Group AG wrote in a note to clients yesterday.
The fine is the latest scandal to hit Britain’s banking industry this year after Barclays Plc was fined a record 290 million pounds in June for manipulating the London interbank offered rate, the benchmark interest rate for $500 trillion of securities worldwide. Chief Executive Officer Robert Diamond, Chairman Marcus Agius and Chief Operating Officer Jerry Del Missier all stepped down following the fine.
Standard Chartered CEO Peter Sands will probably keep his job because the bank largely followed the rules, according to Leech.
“It’s become apparent the DFS rhetoric was quite emotive and the fact other regulators in the U.K. and U.S. have distanced themselves,” said Leech. “All that suggests the wrongdoing was to do with the letter of the law, but in the substance and spirit, Standard Chartered was 99.9 percent compliant.”
Jon Tracey, a spokesman for Standard Chartered, declined to comment.
The fine may be the largest paid to an individual regulator under a money laundering accord. In June, ING Bank NV agreed to pay $619 million to settle similar allegations. That sum was split evenly between the federal government and the Manhattan District Attorney.
Standard Chartered’s penalty is high when compared with the $160 million Wells Fargo & Co.’s Wachovia Bank unit paid in 2010 to resolve a criminal investigation of how drug cartels used the bank to launder money through Mexican exchange houses, said Chris Skinner, director of the Financial Services Club, and CEO of Balatro Ltd., a banking industry research firm in London. Wachovia admitted failing to monitor $420 billion in trades through exchange houses, known as casas de cambio.
“In the context of the two, I’d say they’ve been fined heavily,” he said.