Acting Financial Services Superintendent Linda A. Lacewell and Manhattan District Attorney Cy Vance, Jr. today announced the Department of Financial Services (DFS) and the Office of the Manhattan District Attorney have fined Standard Chartered Bank $463.4 million for violating sanctions laws that concealed illegal financial transactions clients engaged in with Iran and other sanctioned countries. The global settlement announced today was reached in conjunction with the Manhattan District Attorney, the U.S. Department of Justice, the U.S. Treasury Department, the New York branch of the Federal Reserve Bank, and the U.K. Financial Conduct Authority. Since DFS launched an investigation of the bank in 2012, Standard Chartered has paid fines to New York totaling more than $1.1 billion.

“Global financial institutions serve as the first line of defense against money laundering and the financing of terrorist activities and those that fail to foster a strong compliance culture will be held accountable,” said Acting Superintendent Lacewell.  “While Standard Chartered has taken significant remedial measures since 2014 to develop a more robust program to prevent these egregious activities, the time has come for the bank to finish the job. DFS will take whatever measures necessary to ensure that the bank lives up to its word and maintains effective safeguards against sanctions violations and money laundering. We appreciate the cooperation and assistance of the Office of the Manhattan District Attorney, Federal Reserve Bank of New York, and the U.S. Departments of Justice and Treasury in helping DFS resolve this matter."

District Attorney Vance said: “Our office’s unique jurisdiction and expert personnel have again enabled us to deliver hundreds of millions in ill-gotten gains to the People of New York while contributing to America’s longstanding effort to promote democratic values around the world. We are honored and privileged to collaborate in this shared endeavor with the supremely talented public servants of the New York Department of Financial Services, the U.S. Departments of Justice and Treasury, and the Federal Reserve Bank of New York.”

The misconduct uncovered by DFS and resolved today related to $600 million in U.S. dollar clearing transactions between 2008 and 2014 that originated from Standard Chartered’s London home office and its Dubai branch and that were transmitted to its branch in New York City, in violation of federal and New York State laws.  Despite the bank’s repeated assurances to the Department, DFS’s on-going investigation identified significant gaps in the bank’s payment systems controls, incomplete customer due diligence, inadequate sanctions compliance leadership and little oversight of employees in Dubai.

The bank also conducted an additional $20 million in U.S. dollar payments for illegal transactions involving Syrian, Sudanese, Burmese and Cuban entities.  A majority of these transactions also flowed through the bank’s New York Branch.

DFS’s investigation found that both a senior U.S. sanctions compliance officer, and a senior U.K. sanctions compliance officer utterly failed to take steps to ensure that transactions from Iran were blocked after bank staff discovered dozens of clients used an internet platform known as “Straight-to-Bank,” or “S2B,” to access U.S. dollar accounts from Iran. Instead, the two executives proceeded in a “business-as-usual fashion”, undertaking a sluggish effort to try and persuade business managers to implement blocking of the S2B platform in Iran and other sanctioned countries – Myanmar, Sudan, Syria and Cuba.

DFS found that senior compliance managers also failed to take any steps to block or better identify payment instructions from customers originating from Iran through a bank fax system at the branch in the UAE in Dubai.

The Department’s investigation further revealed that the bank’s compliance infrastructure in the UAE region was woefully inadequate. Compliance staff were poorly trained and unconcerned with U.S. sanctions regulations.

DFS discovered some of the bank’s sanctions violations during the Department’s separate investigation of another bank.  Between 2008 and 2012, Standard Chartered processed more than $150 million in incoming and outgoing dollar transactions for an Iranian petrochemical company, which was masked as being operated from Dubai.  In another case, a bank manager in Dubai improperly took money from a sanctioned Iranian corporate entity to buy a personal car. Later, after the entity’s account was closed because of its sanctioned risk, the manager helped open another account for the entity under a different corporate name.

Another manager in Standard Chartered was found to have advised an Iranian front company located in Dubai how to evade detection by changing its corporate name and then opening a new account.

Under the terms of the consent order, Standard Chartered is paying DFS a $180 million fine and the bank is continuing to engage an independent consultant to oversee remediation at the bank.  Additionally, DFS is requiring Standard Chartered to submit to DFS written plans to improve and enhance the bank’s OFAC and New York laws and regulation compliance including an annual assessment of OFAC compliance risks, the establishment of an OFAC compliance reporting system, employee training on OFAC-related issues, and an audit program designed to test for compliance with OFAC Regulations.  Standard Chartered must also submit a Sanctions Corporate Oversight Plan for a sustainable governance framework that includes actions the bank’s board will take to maintain effective control over compliance with both OFAC laws and regulations and related New York laws and regulations.

DFS recognizes Standard Chartered’s cooperation with DFS’s investigation, as well as the bank’s efforts since 2014 to install new senior leadership on its Board of Directors and in senior management to foster an improved culture of compliance and enhancements to its compliance function.

A copy of the consent order can be found here.

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