New York’s Department of Financial Services, under the authority of Benjamin Lawsky, has leveled a series of charges against Standard Chartered Bank, accusing it of working with Iran on 60,000 secret transactions involving $250 billion in funds. This violates federal law and international tracking of financing suspected in terrorism cases. DFS also found transactions between SCB and other countries previously restricted from bank transactions by the US, including Libya, Myanmar and Sudan. But this complaint focuses on Iran.
Marcy Wheeler asks the right questions here. The sanctions against banks doing business with Iran are federal in nature, and should be monitored by the Office of Foreign Assets Controls at the Treasury Department. Indeed, in response to the charges, Standard Chartered claims to have been working with OFAC, the Justice Department, the Federal Reserve Bank of New York, the district attorney of New York City AND this Department of Financial Services. Standard Chartered said they approached the regulators in January 2010 about a review of their transactions. In other words, all the agencies except for DFS had at least some knowledge of these transactions for over two years, and yet they did nothing.
In fact, we have a pretty good idea what OFAC’s action would look like, because earlier this year it sanctioned ING for actions that were similar in type, albeit larger in number (20,000 versus 60,000) and far larger in dollar amount ($1.6 billion involving Cuba versus $250 billion involving Iran). Both banks were doctoring fields in SWIFT forms to hide the source or destination of their transfers […]
A likely explanation is that these unnamed other law enforcement agencies are working up yet another Deferred Prosecution Agreement that claims the companies have cooperated when they really haven’t–as Treasury did with ING and even more so with JP Morgan Chase–SFS used its regulatory position to expose the ongoing behavior.
If Yves and I are right, in addition to the outrage at SCB (and Deloitte and Touche, which collaborated in this fraud), DFS’ actions should elicit discussions about why Treasury continues to insist banks are cooperating when they really aren’t.
Yves Smith basically goes down the same road.
What’s interesting here to me is that DFS was essentially created by Andrew Cuomo, pulling a lot of the expertise out of the New York state Attorney General’s office and putting it into an executive agency under his authority. And Lawsky has been simply more aggressive on the banking industry than the AG. In fact, DFS has become more aggressive than the federal regulators, in this case.
You could also apply this to the HSBC case, another case of illegal money laundering, which we found out about from a Senate committee rather than DoJ or Treasury. Simply put, lots of regulators – and even non-regulatory Congressional actors – are doing the work that Treasury and Main Justice refuse to do.
Standard Chartered, meanwhile, could lose their license in the state of New York over this. Shares in Standard Chartered have plummeted. But the feds appear asleep on this one.