The review was conducted by external counsel and external consultants and Standard Chartered waived its attorney-client and work product privileges to ensure that all the US agencies would receive all relevant information.
Standard Chartered said it gave regular updates and presentations to the DFS and the other agencies on the results of its investigation, including several thousands of pages of documents and interview notes, plus analysis of approximately 150 million payment messages.
"We intend to discuss these matters with the DFS (New York State Department of Financial Services) and to contest their position," Standard Chartered said, adding that it had ceased "all new business with Iranian customers in any currency over five years ago".
In a devastating 27-page order Benjamin Lawsky, superintendent of the New York State Department of Financial Services, claims that Standard Chartered Bank (SCB) “operated as a rogue institution” – and that the bank’s group directors in London were complicit.
The watchdog has called on the lender to explain the apparent violations and demonstrate why it should not be banned from Wall Street.
In October 2006, the head of the bank’s American operations “sent a panicked message to the group executive director in London” saying that the bank’s handling of Iranian clients could cause “catastrophic reputational damage”. The unnamed director allegedly replied: “You f****** Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians.”
The order, which last night triggered a 6pc drop in Standard Chartered’s share price in the minutes left before the markets closed, claims: “Motivated by greed, SCB acted for at least 10 years without any regard for the legal, reputational, and national security consequences of its flagrantly deceptive actions.
Lord Davies, the former Labour minister, was chief executive of Standard Chartered between 2001 and 2006. The current chief executive, Peter Sands, was promoted to the top job from finance director in November 2006. Mr Sands, one of Britain’s most respected bankers, was credited with masterminding the “Balti bail-out” that shored up the financial system at the apex of the crisis in 2008.
The order comes just two weeks after HSBC was accused of money laundering more than £9bn on behalf of clients in Mexico and Russia. Trade Minister Lord Green, who was chief executive of HSBC at the time, admitted “regret” over the failures.
Mr Lawsky has instructed Standard Chartered to “appear and explain apparent violations of law”; to “demonstrate why [the bank’s] licence to operate in the State of New York should not be revoked”; and why its $190bn dollar clearing operations should not be suspended immediately.
The order claims that Standard Chartered devised a system to disguise the identity of Iranian client transactions in a deliberate effort to bypass US anti-money laundering defences. Mr Lawsky says it was helped by its accountants. “SCB carefully planned its deception and was apparently aided by its consultant Deloitte & Touche, which intentionally omitted critical information in its “independent report” to regulators”, the order alleges.
A footnote suggests the allegations could be even broader: “The Department’s initial focus is on SCB’s apparent systematic misconduct on behalf of Iranian clients. However, the Department’s review has uncovered evidence with respect to what are apparently similar SCB schemes to conduct business with other US sanctioned countries, such as Libya, Burma and Sudan. Investigation of these additional matters is ongoing.”
The legal papers against Standard Chartered came as it emerged RBS is also being investigated by US authorities over failings in its money-laundering controls.
The lender admitted the US Federal Reserve was reviewing its US operations in its half-year results.
