The New York Times on August 6, 2012 released the following:
“By JESSICA SILVER-GREENBERG
Using its New York-based operations, a major British bank schemed with the Iranian government for nearly a decade to launder $250 billion, leaving the United States financial system vulnerable to terrorists and corrupt regimes, New York’s top banking regulator charged on Monday.
The New York State Department of Financial Services accused Standard Chartered, which the agency called a “rogue institution,” of masking more than 60,000 transactions for Iranian banks and corporations, motivated by the millions of dollars it reaped in fees.
Senior management at the 150-year-old bank used the New York branch “as a front for prohibited dealings with Iran — dealings that indisputably helped sustain a global threat to peace and stability,” according to a regulatory order sent to the bank. The order requires the bank to explain the apparent violations of law in a hearing later this month and justify why its license to operate in New York shouldn’t be revoked.
The bank said Monday night that it “strongly rejects the position and portrayal of facts” by the agency.
The Federal Bureau of Investigation said that it had an open investigation into money laundering at Standard Chartered. In the order, regulators paint a vivid picture of a cover-up that included the code name “Project Gazelle,” money flowing to Iran’s central bank, United States executives warning of “criminal liability,” and a manual that taught employees how to automate the masking of a rising number of illegal transactions.
The accusations against Standard Chartered come as United States officials work to crack down on the flow of money to foreign countries, companies and individuals connected to terrorism, weapons of mass destruction and drug trafficking.
Beyond the dealings with Iran, the banking regulator said it had discovered evidence that Standard Chartered operated “similar schemes” to do business with other countries under United States sanctions, including Myanmar (formerly Burma), Libya and Sudan.
Earlier Monday, a spokesman for Standard Chartered said the bank was reviewing its “historical U.S. sanctions compliance and is discussing that review with U.S. enforcement agencies and regulators.”
But the order accuses senior executives at the bank of suppressing complaints. For example, in 2006, according to the order, the bank’s chief executive for the Americas wrote his bosses in London that the transactions had “the potential to cause very serious or even catastrophic reputational damage to the group.”
According to the order, the response was hostile, denigrated Americans and asked: “Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians.” The department of financial services, led by superintendent Benjamin M. Lawsky, said it was “impossible to know” how much of the money might have been used by Iran to finance its nuclear program or to support terrorist organizations.
Mr. Lawsky said that the department, which examined more than 30,000 internal memos, e-mails and other documents in its nine-month investigation, will hold hearings to determine any financial penalty.
Standard Chartered is the latest in a series of global banks to be accused of facilitating illegal flows of money from outside the United States. In July, a Senate panel issued a report that accused HSBC of being used by Mexican drug cartels to funnel cash back into the United States, by Saudi Arabian banks with terrorist ties that needed access to dollars and by Iranians who wanted to circumvent United States sanctions.
In June, the Justice Department and the New York County district attorney’s office reached a $619 million settlement with ING Bank over accusations that it had illegally moved billions of dollars into the United States for sanctioned Cuban and Iranian entities.
The “apparent fraudulent and deceptive conduct” by Standard Chartered occurred from 2001 to 2010, the order said, and was particularly “egregious,” because some of the transactions were being processed even as the bank was under formal oversight by New York banking regulators from 2004 to 2007.
Standard Chartered, which is based in London, relies for most of its profit on business in Africa, Asia and the Middle East.
Before 2008, the federal government permitted money to be transferred through the United States from one non-American based entity to another, but only after being thoroughly vetted to detect suspicious activity. In so-called U-turn transactions, a foreign institution routes money to a bank in the United States, which transfers the money immediately to a separate foreign institution.
Suspecting that Iran was using its banks — including the Central Bank of Iran/Markazi, Bank Saderat and Bank Melli — to finance nuclear weapons and missile programs, the policy toward Iran changed and the transactions were banned entirely in 2008.
The order on Monday cited those Iranian state-owned banks as clients of Standard Chartered.
Standard Chartered disputed the accusations and said that “well over 99.9 percent of the transactions relating to Iran complied with the U-turn regulations.” Those that did not comply amounted to less than $14 million, the bank said.
The bank said in its statement late Monday that it had kept federal and state authorities apprised of the review it initiated in 2010. It said that it “did not identify a single payment” connected to a terrorist entity or organization and that it had “ceased all new business with Iranian customers” five years ago.
The apparent illegal activity stretched back to 1995 after President Bill Clinton levied sanctions against Iran. At the time, the general counsel of Standard Chartered e-mailed the bank’s chief compliance officer a plan to ignore regulations imposed by a division of the Treasury Department, according to the order.
In the e-mails included in the order, the executives said a memo containing the plan “MUST NOT be sent to the U.S.,” to prevent prosecution.
That strategy of flouting the United States law was commonplace by 2001, Mr. Lawsky said. An e-mail from a lawyer to bank executives in 2001 said that payment instructions for Iranian clients “should not identify the client or the purpose of the payment.”
One Iranian client, for example, was told to use “NO NAME GIVEN” in paperwork to transfer money, the order said. That way, the money transfer could escape scrutiny and “not appear to N.Y. to have come from an Iranian bank,” a 2003 e-mail from a Standard Chartered official said.
In a strategy called Project Gazelle, the bank devised to forge “new relationships with Iranian companies” and intermediaries “in oil- and gas- related businesses,” a memo from 2005 included in the order said.
The bank’s management created a formal operating manual called “Quality Operating Procedure Iranian Bank Processing,” that showed staff members how to strip off information that might tie them to the sanctioned Iranian institutions.
The bank came under scrutiny from the Federal Reserve Bank of New York in 2003 after regulators discovered deficiencies in monitoring its transactions.
As a result, the bank entered a formal agreement with regulators that it strengthen its oversight and bring in an independent consultant to inspect transactions from July 2002 to October 2004.
Even the independent monitoring, by Deloitte & Touche, was perverted, according to Mr. Lawsky. In 2005, at the behest of the bank, Deloitte agreed to omit critical transactions from its report to regulators. “This is too much and too politically sensitive for both SCB and Deloitte. That is why I drafted the watered-down version,” a Deloitte executive said in a 2005 e-mail in the order.
Deloitte denies it aided the bank. The consultant “performed its role as independent consultant properly and had no knowledge of any alleged misconduct by bank employees,” Jonathan Gandal, a Deloitte spokesman said in a statement. “Allegations otherwise are unsupported by the facts.” In its last examination of the bank, in 2011, the state’s Department of Financial Services said it had found “continuing and significant” failures in complying with bank secrecy and money laundering laws.”
Douglas McNabb – McNabb Associates, P.C.’s
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