Federal and state regulations prohibit certain kinds of conduct by banks. That includes money laundering and dealing with Iran. Standard Chartered violated both ends of that - they not only engaged in money laundering deals with Iran, but lied to regulators and sought to cover up their activities.
Benjamin M. Lawsky, New York Superintendent of Financial Services, claimed that Standard Chartered engaged in $250 billion of money laundering. There was much hand wringing, including from federal regulators who didn't necessarily like the idea of the state regulator jumping on Standard Chartered.
The bank steadfastly refused and rejected the claims.
That is, right up until the moment that the bank agreed to settle the case with New York for a civil fine of $340 million.
In addition to the civil penalty, Lawsky said the bank agreed to an outside monitor for at least two years to check on controls on money-laundering at its New York branch.Lawsky says that the bank agreed that the conduct at issue involved transactions of at least $250 billion, even if the bank claims that it amounted to $14 million.
Lawsky's aggressive stance heightened his public profile just months after the Department of Financial Services, the agency he heads, was created out of the state's banking and insurance regulators.
Within minutes of the announcement, New York Governor Andrew Cuomo lauded the "effectiveness and leadership" of the new agency.
"New York needed a tough and fair regulator for the banking and insurance industries to protect consumers and investors," Cuomo said.
But Lawsky has also drawn fire by jumping ahead of a two-year probe into Standard Chartered by the U.S. Treasury, the Federal Reserve, the Justice Department, and New York prosecutors.
"It's very unfortunate this wasn't done as a global state and federal settlement," said Ed Wilson, a former senior attorney at the U.S. Treasury Department.
As negotiations with Lawsky progressed last week and this week, the bank held separate talks with other authorities. It had hoped to land a deal on both fronts, but Lawsky's solo announcement Tuesday made clear that had not happened.
Underscoring a continuing divide with Lawsky, the other authorities issued short statements saying they would continue to work together.
"Treasury will continue working with our state and federal partners to hold Standard Chartered accountable for any sanctionable activity that may have occurred," the Treasury Department said.
In his announcement on Tuesday, Lawsky said the bank had "agreed that the conduct at issue involved transactions of at least $250 billion." But he gave no details on what protections the deal gave Standard Chartered.
Standard Chartered believes that it limited its liability further by entering the deal, but what I'd like to know is where all this money is going to go. The money is being collected by the NYS DFS, and that potentially represents a windfall to the state. I'd like to see an accounting of these funds.
At the same time, there's still the potential for the Treasury Department to impose its own penalties against the bank. That could result in a comparable sum but it also highlights that banking and financial regulators have a long way to go before they can claim to have gotten these kinds of transactions to stop.
Labels: banking, Benjamin Lawsky, crimes and misdemeanors, Iran, money laundering, scandals, Standard Chartered