Standard Chartered the Bank agreed to settle charges by New York
Department of Financial Services that it had helped Iran evade financial
sanctions. But Lawsky has become a superhero. Mr. Lawsky’s headline a
rogue instittution grabbed attention.He accused Standard Chartered of
conspiring with Tehran in a scheme to move $250 billion through the
bank’s New York branch. The sensational charges quickly knocked 25% off
the bank’s share price, and Standard Chartered had little choice but to
settle to retain its banking license.But many see this as a publicity
score as this accusation do more harm than good.For a sense of scale,
Standard Chartered’s New York office does close t$200 billion per day in
“dollar clearing” for clients around the world. In suchansactions,
foreign parties on both ends of a deal want to do business in
U.Sdollars. So their transaction is routedom overseas through a New York
clearing bank.
As long as both sides of a clearing transaction were located offshore, some of these “u-turn” trades through U.S. banks were allowed with Iranian clients until 2008. Don’t ask us why it took that long for the U.S. government to apply real economic pressure to the world’s most dangerous regime.
Mr. Lawsky cited internal documents and interviews with Standard Chartered executives that describe a systematic effort, particularly in the early 2000s, to hide Iranian transactions from U.S. regulators and even U.S. employees of the bank. “Stripping” the identity of Iranian clients off communications and trade orders sent to New York seems to have been commonplace.. It doesn’t appear that Mr. Lawsky has uncovered any information that wasn’t handed to him by the bank or other regulators. It’s not clear that his office even participated in all the interviews with bank executives that he presented as evidence.
The key question is that could there be any sort of denial of Iran or other rogue regimes from financial markets. If the message to bankers from Mr. Lawsky’s Eliot Spitzer moment is to withhold information lest they invite overzealous prosecution, reputational damage and destruction of shareholder wealth, we can expect less cooperation from other banks and other governments. It also hurts the reputation of U.S. law enforcement if banks can be subject to multiple prosecutions based on different standards and claims of evidence.
As long as both sides of a clearing transaction were located offshore, some of these “u-turn” trades through U.S. banks were allowed with Iranian clients until 2008. Don’t ask us why it took that long for the U.S. government to apply real economic pressure to the world’s most dangerous regime.
Mr. Lawsky cited internal documents and interviews with Standard Chartered executives that describe a systematic effort, particularly in the early 2000s, to hide Iranian transactions from U.S. regulators and even U.S. employees of the bank. “Stripping” the identity of Iranian clients off communications and trade orders sent to New York seems to have been commonplace.. It doesn’t appear that Mr. Lawsky has uncovered any information that wasn’t handed to him by the bank or other regulators. It’s not clear that his office even participated in all the interviews with bank executives that he presented as evidence.
The key question is that could there be any sort of denial of Iran or other rogue regimes from financial markets. If the message to bankers from Mr. Lawsky’s Eliot Spitzer moment is to withhold information lest they invite overzealous prosecution, reputational damage and destruction of shareholder wealth, we can expect less cooperation from other banks and other governments. It also hurts the reputation of U.S. law enforcement if banks can be subject to multiple prosecutions based on different standards and claims of evidence.
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