Standard Chartered Said to Probe Failures Leading to Lawsky Fine

Aug 20, 2014 9:10 am ET

Aug. 20 (Bloomberg) -- Standard Chartered Plc is probing why anti-money laundering controls implemented as part of a 2012 deal with New York’s banking regulator missed numerous suspicious transactions, a person with knowledge of the matter said.

The so-called accountability review could lead to firings over the compliance failures that cost the bank another $300 million in fines yesterday, according to the person, who asked not to be identified because the investigation is private. Standard Chartered said that it’s “begun extensive remediation efforts,” without elaborating.

The faulty controls were spotted by an independent monitor installed by the New York Department of Financial Services in 2012 to ensure the bank followed the terms of that settlement. Superintendent Benjamin Lawsky said in the regulator’s statement that anti-money laundering compliance “is vital to helping prevent terrorism and vile human rights abuses.” The monitor’s two-year term was extended for another two years as part of yesterday’s accord.

The fine is adding to pressure on Chief Executive Officer Peter Sands to restore investor confidence amid decreasing earnings and increasing compliance costs. Standard Chartered will also have to cut off its dollar clearing work for some high-risk clients in Hong Kong and the United Arab Emirates, and get authorization from Lawsky’s office to take on new clients for processing transactions in U.S. dollars. About three- quarters of the bank’s earnings come from Asia.

Simon Kutner, a spokesman for Standard Chartered, declined to comment.

The bank is working to “raise the bar on conduct,” it said in its Aug. 6 statement announcing first-half results. It established a board-level Financial Crime Risk Oversight Committee and is “undertaking de-risking actions across the business,” according to the statement.

‘Accepts Responsibility’

The New York banking regulator fined Standard Chartered $340 million in 2012 and required it to strengthen its controls against money laundering and work with blacklisted entities as part of a wider $667 million settlement over breaches of U.S. sanctions concerning Iran.

Chairman John Peace was forced by U.S. prosecutors to apologize for downplaying the bank’s misconduct three months after the final 2012 settlement was announced, saying Standard Chartered had no “willful” intention to dodge U.S. laws.

In its statement yesterday, Standard Chartered said it “accepts responsibility for and regrets the deficiencies in the anti-money laundering transaction surveillance system at its New York branch.”