Standard Chartered Plc has already paid a painful penalty for secretly moving billions of dollars through the U.S. on behalf of Iranian clients, in violation of sanctions. But a sweeping investigation has found evidence suggesting that the bank’s Iranian business was more extensive than it admitted, according to five people familiar with the matter.
Now U.S. authorities are weighing a criminal penalty against Standard Chartered and individual employees, said the people, who requested anonymity to speak about the probe.
A coalition of enforcement and regulatory agencies, including the Justice Department, New York’s Department of Financial Services and the Manhattan District Attorney, have finished their investigation and may announce the resolution by the end of the year, the people said.
Authorities may impose an even bigger fine than the $667 million the bank paid in 2012 to penalize it for what they view as concealment, though specific numbers had not yet been discussed in negotiations as of early August, according to the people, who declined to comment on private talks. In securities filings, the bank has said it could face a range of civil and criminal penalties stemming from the case, “including substantial monetary penalties.” Standard Chartered hasn’t set aside specific reserves for this matter.
“We continue to fully cooperate with the investigation regarding our historical sanctions compliance and are engaged in ongoing discussions with the U.S. authorities,” Julie Gibson, a spokeswoman for Standard Chartered, said in a prepared statement. “While we do not comment on the substance of those discussions, we look forward to the resolution of this matter.”
Standard Chartered fell as much as 2.2 percent and was trading 1.8 percent lower at 11:41 a.m. in London, the worst performer among the 40 members in the Bloomberg Europe 500 Banks and Financial Services Index.
In its annual report, the bank said the U.S. probe is “examining the extent to which conduct and control failures permitted clients with Iranian interests to conduct transactions through Standard Chartered Bank.”
How the case is resolved may reveal much about the U.S.’s approach to enforcement on issues of key concern under President Donald Trump. He has reasserted a hard line on Iran, which the administration views as a state sponsor of terrorism and a source of regional instability, scuttling the nuclear agreement struck by the Obama administration and re-imposing the sanctions regime that had been in place before.
But at the same time, the Justice Department has promoted smaller penalties for corporate misconduct, while prioritizing the prosecution of individuals. The Obama administration’s sanctions enforcement policy was characterized by big fines but rarely criminal charges for companies or their executives, leading to criticism that it wasn’t holding financial executives to account for wrongdoing.
Since 2009, the U.S. has brought about three dozen cases against financial firms for doing business with or handling funds linked to sanctioned countries and individuals –- primarily Iran, Sudan and Cuba. Almost all of those cases were resolved without criminal charges or through deferred-prosecution agreements, like the one reached with Standard Chartered in 2012.
Over the past few months, Deputy Attorney General Rod Rosenstein suggested some companies overpaid for their misconduct during the Obama administration, and put in place new policies to stop what he called a “piling on” of fines by multiple federal and state enforcers for the same behavior — a potential issue in the Standard Chartered case given the number of agencies involved.
Under the new policy, Rosenstein said the Justice Department may credit companies for fines imposed by other authorities.
In settling the original case, Standard Chartered admitted that it hid or disguised the identity of Iranian clients — including the central bank of Iran — in billions of dollars of transactions through the U.S. from 2001 to 2007. As part of the deferred-prosecution agreement, the bank agreed to have an outside monitor scrutinize its business practices and the U.S. agreed to eventually dismiss charges after the bank complied with a deal.
Those terms were set to expire in 2014. But authorities extended the deal — and opened another investigation — after suspicions arose that Standard Chartered continued to conduct Iranian business for clients after 2007. The business allegedly involved facilitating payments for firms based in the United Arab Emirates that were trading with Iranian counterparts, according to people familiar with the probe.
That year, it paid another $300 million to the New York state banking regulator after the monitor uncovered a flaw in Standard Chartered’s system for tracking suspicious transactions, which the bank was required to do under the original agreement.
The agreement has since been extended twice more, including as recently as last month, and will now run until the end of 2018. Authorities said the bank’s sanctions compliance program “has not yet reached the standard required” by the deal. In court filings in Washington, prosecutors have said the government “obtained, and continues to obtain, new information related to possible historical violations of U.S. sanctions laws and regulations” after 2007.
Authors: Christian Berthelsen , Greg Farrell , and Tom Schoenberg