Standard Chartered PLC
) has reached a $340 million settlement with the New York State
Department of Financial Services (DFS) pertaining to money
laundering in Iran. The agreement comes almost a fortnight after
the London-based bank was accused by the New York's top regulating
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Earlier this month, the DFS had accused Standard Chartered bank of
concealing transactions worth $250 billion (£160 billion) relating
to Iran. According to the DFS, these transactions, which took place
in the last decade, were in contempt of the U.S. laws and
As per the DFS, Standard Chartered had set up an operation named
Project Gazelle to funnel Iranian money through American financial
system. The company duped the regulators by removing the codes of
transfer and carried out nearly 60,000 transactions with the
Iranian government in the last ten years. This resulted in huge fee
income for the bank at the cost of the national security of the
The tough stance taken by the DFS to revoke Standard Chartered's
New York banking license prompted the bank's CEO Peter Sands to
negotiate with the DFS. The weeklong negotiations created a
worldwide frenzy. At the end of the hurried discussions, the
parties reached a conclusive settlement, whereby the bank agreed to
shell out hefty compensation to the regulatory authority.
According to Standard Chartered, out of the alleged claim of $250
billion money laundering, only $14 million worth of transactions
violated the U.S. regulations. However, the DFS head Benjamin
Lawsky has claimed in a statement that the parties did reach a
consensus as to the amount involved in laundering. As the terms of
the deal have not been made public yet, it would be too early to
comment on such crucial points of the agreement.
Recently, the top executives at
HSBC Holdings plc
), another UK-based bank faced a tough inquiry by the congressional
committee for their alleged involvement in money laundering during
the period 2004-2010. The investigation revealed substantial lapses
in the bank's anti-money laundering compliance. This resulted in a
worldwide displacement of funds from riskier nations through the
bank. Controversial transactions pertaining to its Iranian
clientele and the illegal narcotics trade in Mexico drew maximum
The DFS came down hard on the unwarranted activities of the banking
giant and the huge settlement is a big victory for the regulator.
Moreover, the state of cash strapped New York stands to benefit
from this settlement, as the money would flow in its general fund.
Still, no one can ignore the fact that the huge compensation amount
is being paid to a state regulatory authority, whereas the national
regulators are nowhere in the scene. This is indeed baffling for an
Shares of Standard Chartered currently retain a Zacks #3 Rank,
which translates into a short-term Hold rating.