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04:51 BST, August 20, 2014A Standard Chartered fine of $300 million has been imposed by Benjamin M. Lawsky, Superintendent of Financial Services, New York. The penalty is for failing to remediate anti-money laundering compliance problems agreed in the 2012 settlement with NYDFS (New York State Department of Financial Services).
The London-based bank must also get the state’s approval for accepting new dollar clearing accounts.
The bank announced that a small proportion of its customers could be affected by the dollar clearing suspension for high risk retail clients at its Hong Kong offices, as well as the banning of high-risk client relationships in UAE (United Arab Emirates).
Hong Kong’s de facto central bank, the Hong Kong Monetary Authority, says it has been monitoring the anti-money laundering controls in Standard Chartered’s Hong Kong unit closely. While saying it identified some areas for improvement, they did not “cause significant supervisory concern.” It has told Standard Chartered in Hong Kong to take appropriate actions regarding its customers who may be affected by the penalty.
Non-compliance Consequences
Mr. 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.”
In a press release, Standard Chartered wrote:
“The Group accepts responsibility for and regrets the deficiencies in the anti-money laundering transaction surveillance system at its New York branch. The Group has already begun extensive remediation efforts and is committed to completing these with utmost urgency. More broadly, the Group is committed to enhancing its effectiveness in the fight against financial crime, and in this context, has committed substantial resources to a multi-year Financial Crime Risk Mitigation Program.”
A stain on Standard Chartered’s reputation
Most analysts believe the penalty will be bad for Standard Chartered’s international business and reputation.
The settlement, which had been expected, is the second penalty imposed by the New York state regulator on Standard Chartered during the past two years, In 2012, the bank was fined $340 million by the same regulator in a settlement for allegations of illegal conduct regarding transactions for Iranian customers.
AFP quoted Francis Lun, an independent financial analyst, who said “It’s really an oversight on the part of Standard Chartered. They’d already paid a huge penalty [and] still installed a system that is useless. It will create tremendous problems with their international clients who cannot settle their accounts in US dollars. It will be a serious blow to Standard Chartered group’s international business.”
Several European banks fined in US
In recent years, several European banks have been fined by US regulators for money laundering misconduct or doing business with blacklisted nations, including Barclays, BNP Paribas, UBS, and HSBC.
BNP had the largest fine ($8.97 billion). However, Standard Chartered is the only repeat offender.
Reuters quoted an unnamed individual claiming to be familiar with the settlement who said its terms are not expected to be material to Standard Chartered’s results.