Standard Chartered Agrees To $340 Million Fine From NYS Regulator

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'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.

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.

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.

Hizbullah's Money Laundering Operations Include Beirut Bank, Drug Trade

The Islamic terror group Hizbullah, which gets support from Syria and Iran and operates with impunity through much of Lebanon has the means to sustain itself with the drug trade and money laundering courtesy of a Beirut bank.

Now, in the wake of the bank’s exposure and arranged sale, its ledgers have been opened to reveal deeper secrets: a glimpse at the clandestine methods that Hezbollah — a terrorist organization in American eyes that has evolved into Lebanon’s pre-eminent military and political power — uses to finance its operations. The books offer evidence of an intricate global money-laundering apparatus that, with the bank as its hub, appeared to let Hezbollah move huge sums of money into the legitimate financial system, despite sanctions aimed at cutting off its economic lifeblood.

At the same time, the investigation that led the United States to the bank, the Lebanese Canadian Bank, provides new insights into the murky sources of Hezbollah’s money. While law enforcement agencies around the world have long believed that Hezbollah is a passive beneficiary of contributions from loyalists abroad involved in drug trafficking and a grab bag of other criminal enterprises, intelligence from several countries points to the direct involvement of high-level Hezbollah officials in the South American cocaine trade.

One agent involved in the investigation compared Hezbollah to the Mafia, saying, “They operate like the Gambinos on steroids.”

On Tuesday, federal prosecutors in Virginia announced the indictment of the man at the center of the Lebanese Canadian Bank case, charging that he had trafficked drugs and laundered money not only for Colombian cartels, but also for the murderous Mexican gang Los Zetas.

The revelations about Hezbollah and the Lebanese Canadian Bank reflect the changing political and military dynamics of Lebanon and the Middle East. American intelligence analysts believe that for years Hezbollah received as much as $200 million annually from its primary patron, Iran, along with additional aid from Syria. But that support has diminished, the analysts say, as Iran’s economy buckles under international sanctions over its nuclear program and Syria’s government battles rising popular unrest.

Yet, if anything, Hezbollah’s financial needs have grown alongside its increasing legitimacy here, as it seeks to rebuild after its 2006 war with Israel and expand its portfolio of political and social service activities. The result, analysts believe, has been a deeper reliance on criminal enterprises — especially the South American cocaine trade — and on a mechanism to move its ill-gotten cash around the world.

“The ability of terror groups like Hezbollah to tap into the worldwide criminal funding streams is the new post-9/11 challenge,” said Derek Maltz, the Drug Enforcement Administration official who oversaw the agency’s investigation into the Lebanese Canadian Bank.

In that inquiry, American Treasury officials said senior bank managers had assisted a handful of account holders in running a scheme to wash drug money by mixing it with the proceeds of used cars bought in the United States and sold in Africa. A cut of the profits, officials said, went to Hezbollah, a link the organization disputes.

Despite efforts to crack down and track such money laundering and trafficking operations, Hizbullah has thrived and expanded its drug and money laundering business. It is less dependent on Iran than in previous years, and that makes the group even more dangerous. While it still relies on Syria and Iran for arms shipments, the ability to raise money through its own channels allows it to expand its tentacles into other areas of Lebanese politics and it remains an existential threat to Israel.

The money laundering allows Hizbullah to make significant land purchases in Lebanon that it would not be otherwise capable of doing. Much of those land purchases are in militarily strategic areas and can fortify Hizbullah's position within the fragmented Lebanese society. That further destabilizes the Lebanese political situation, which remains in flux.

Hizbullah operates with impunity in Southern Lebanon, despite UN SCR 1701 that calls for all militia groups to be disarmed. Neither UNIFIL nor the Lebanese military has the ability to disarm the terror group, and Hizbullah forced itself into the Lebanese government and has therefore thwarted further efforts to stop the group's ongoing militarization in Southern Lebanon.