Standard Chartered faces new US money laundering probe

August 6, 2014
Standard Chartered faces new US money-laundering probe/FILE
Standard Chartered faces new US money-laundering probe/FILE

, HONG KONG, August 6 – Standard Chartered confirmed Wednesday that it faces fresh US fines over alleged breaches in its anti money laundering systems, two years after it paid massive penalties for violating American sanctions.

Media reports said the probe by New York’s financial regulator followed allegations that the London-based, Hong Kong listed lender failed to spot millions of risky transactions flowing through its US operations.

The bank said it was bracing to pay fines following the new investigation. The New York Times reported that regulators were seeking a “nine figure penalty”.

“Certain issues have been identified with respect to the group’s post transaction surveillance system, which is part of its anti money laundering systems and controls and is separate from the group’s sanctions screening systems,” the bank said in a filing to the Hong Kong Stock Exchange as it announced its first half results.

“The group is engaged in discussions with New York State Department of Financial Services with respect to those issues and their ongoing remediation.”

Standard Chartered said a “monetary penalty and remedial actions” would likely follow the investigation.

– Banks busted over sanctions –

In December 2012, Standard Chartered agreed to pay US authorities $327 million to settle charges it violated American sanctions, principally on Iran but also on Myanmar, Libya and Sudan.

Four months earlier the New York state banking watchdog had fined the bank $340 million in the same investigation, saying it hid 60,000 transactions with proscribed Iranian clients worth $250 billion over 10 years.

US authorities said the bank had stripped messages on financial transfers routed through US banks of information that would show the beneficiaries were businesses and entities that fell under American sanctions.

Several international banking groups have faced hefty fines from US regulators in recent years for busting sanctions.

HSBC — which was also accused of complicity in money laundering — paid out $1.9 billion in 2012, while Dutch bank ING paid a relatively paltry $619 million.

Most recently, France’s largest bank BNP Paribas was fined a record $8.9 billion last month for violating sanctions on Iran and Sudan, pleading guilty to charges that it deliberately hid thousands of transactions with the two countries as well as Myanmar and Cuba in what officials called a “complex and pervasive scheme”.

News of the fresh investigation came as Standard Chartered announced that its year on year profit for the first half of 2014 was up slightly at 8.4 percent.

The Asia-focused bank saw increasing losses on loans and a weak financial market affect its operations, with net profit at $2.31 billion for the six months ending June 30, up from $2.13 billion in the same period last year.

But the bank’s profit before tax was down 20 percent at $3.27 billion from $4.09 billion last year, with impairment losses on loans seeing a loss of $846 million increased from last year’s loss of $730 million in the same period.

Operating income fell almost five percent to $9.27 billion from $9.75 in the previous year.

Chief executive Peter Sands admitted that the results were “disappointing”.

“It is not what we strive for and not what our investors expect,” he said in the filing.

Richard Hunter, Head of Equities at Hargreaves Lansdown Stockbrokers, said the figures made for “sorry reading”.

But he added: “The previous profit warning took much of the sting out of this update.”

The results and probe were announced after Hong Kong’s stock exchange closed for the night.

In London, shares in Standard Chartered were down 1.89 percent to 1,193.5 pence at 1100 GMT. London’s benchmark FTSE 100 was down 1.19 percent to 6,602.89 points.

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