Where Are the Feds? NY Banking Superintendent: Standard Chartered a “Rogue Institution,” Made $250 Billion of Illegal Transfers With Iran

nakedcapitalism.com / by Yves Smith / August 7, 2012

The New York Superintendent of Financial Services dropped a bombshell today, filing an order against Britain’s Standard Chartered Bank. It charges the bank with having engaged in at least $250 billion of illegal transactions with Iranian banks, including its central bank, from 2001 to 2010, and of engaging in similar schemes with Libya, Myanmar and Sudan (those investigations are in progress). It threatens SCB with the loss of its New York banking license and termination of access to dollar clearing services. The latter alone is as huge deal. You are not a real international bank unless you have dollar clearing. Sumitomo Bank looked at giving up its US banking license in 1985 when it was examining deal structures for making an investment in Goldman, and ascertained that giving up access to Fedwire would cost it over $100 million a year and considerably weaken its position in Japan. SCB is certain to be a much more active dollar player than Sumitomo was and the volume of international transactions has grown hugely since then.

SCB squealed like a stuck pig, claiming that only $14 million of transactions were out of compliance. But the bank has nowhere to go. The NY Superintendent, Benjamin Lawsky, has made his determination. The only thing open for discussion is what sort of punishment he is going to impose. The bank must

…submit to and pay for an independent, on-premises monitor of the Department’s selection to ensure compliance with rules governing the international transfer of funds.

SCB is also up for a license revocation hearing and needs to “demonstrate” why it should not be suspended from clearing dollar transactions in the interim. Having poised a sword of Damocles over the bank’s head, I would expect Lawsky to demand a lot to make this go away, ideally including some executives’ heads as proof the bank was turning over a new leaf (the filing notes that any money damages are to be determined). The flip side is Lawsky may come under pressure precisely because he has shown up the Treasury, Fed, and DoJ. This is a Spitzer-level move from an unexpected source.

2012-08-07 07:48:10

Source: http://silveristhenew.com/2012/08/07/where-are-the-feds-ny-banking-superintendent-standard-chartered-a-rogue-institution-made-250-billion-of-illegal-transfers-with-iran/