By Simon Miller
Standard Chartered has strongly rejected an accusation by the New York State Department of Financial Services (NYSDFS) that it is a rogue operation.
The New York regulator accused the bank of running a rogue unit that colluded with Iran's government to hide more than $250bn (£160bn) in illegal transactions for nearly a decade.
The US has had sanctions against financial transactions with Iran since 1979 but limited transactions known as "U-turns were allowed as long as the money ended up in non-Iranian banks until 2008.
NYSDFS superintendent Benjamin Lawsky said Standard Chartered set up an an operation known as Project Gazelle aimed at helping Iranian banks put money through the US financial system and removed codes to hide transfers.
In its order report, the regulator commented: ""For almost 10 years, SCB [Standard Chartered bank] schemed with the government of Iran and hid from regulators roughly 60,000 secret transactions, involving at least $250bn, and reaping SCB hundreds of millions of dollars in fees.
"SCB's actions left the US financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes, and deprived law enforcement investigators of crucial information used to track all manner of criminal activity," the regulator said. "In short, SCB operated as a rogue institution."
However, Standard Chartered said it strongly rejected the "position or the portrayal of facts as set out in the order".
The bank said it was conducting a review of its historical compliance and in January 2010, the group voluntarily approached all relevant US agencies, including the NYSDFS, and informed them that Standard Chartered had initiated a review of historical US dollar transactions and their compliance with US sanctions.
"This review focused primarily on transactions relating to Iran in the period 2001-2007, and in particular, their compliance with the U-turn framework established by the US authorities to enable ongoing US dollar trade with Iran by other countries," said the bank in a statement.
The statement continued: "The group does not believe the order issued by the NYSDFS presents a full and accurate picture of the facts. The analysis, that the group shared with all the US agencies, demonstrates that throughout the period the group acted to comply, and overwhelmingly did comply, with US sanctions and the regulations relating to U-turn payments. As we have disclosed to the authorities, well over 99.9% of the transactions relating to Iran complied with the U-turn regulations. The total value of transactions which did not follow the U-turn was under $14m."
The bank said it believed the interpretation reflected in the NYSDFS’ order, of the U-Turn exemption — a federal regulation administered and enforced by federal authorities — was incorrect as a matter of law.
"The group’s review of its Iranian payments also did not identify a single payment on behalf of any party that was designated at the time by the US Government as a terrorist entity or organisation," it added.
The New York regulator has demanded a meeting on 15 August with Standard Chartered and could potentially remove its banking licence, shutting it out of the US.
Standard Chartered commented: "The group is engaged in ongoing discussions with the relevant US agencies. Resolution of such matters normally proceeds through a co-ordinated approach by such agencies. The Group was therefore surprised to receive the order from the NYSDFS, given that discussions with the agencies were ongoing. We intend to discuss these matters with the NYSDFS and to contest their position."