StanChart Strikes Back at Rebel Regulator; U.K. Examines Banking Culture

Receiving Wide Coverage ...

StanChart Revisted: Remember how New York regulators were accusing Standard Chartered of helping Iranians launder $250 billion, but the British bank was only acknowledging $14 million in improper transactions? According to the FT, the discrepancy stems from StanChart's belief it used an exemption to U.S. sanction law, known as a U-turn. This exemption allowed banks operating in the U.S. to process transactions from rogue nations such as Iran so long as they were initiated offshore and properly vetted by the overseas financial institution. The U-turn exemption was revoked back in 2008, but, in its formal statement, StanChart asserts it ceased doing new business with the Iranians five years ago. The bank also says it is absolutely sure it wasn't doing business with terrorists.

The New York State Department of Financial Services, led by attorney Benjamin Lawsky, maintains the bank was duplicitous, not diligent in its actions, and, therefore, deserves to have the book thrown at it, but the British bank isn't the only entity questioning the scope of the allegations. According to the Times, officials at the Federal Reserve, the Justice Department and the Treasury Department are also "debating just how expansive the suspected wrongdoing was at Standard Chartered." The Treasury Department apparently believes the transactions are questionable, but not necessarily illegal. Meanwhile, the Fed, which has been investigating the matter since 2010, has yet to compile enough information to act. (No surprise there.)

The lack of involvement from the federal authorities has led some media outlets, notably British publications, to wonder if StanChart was the victim of a renegade regulator, but it has also earned the ire of many Americans who believe the financial institution is on its way to becoming the latest big bank allowed to behave badly.

"Does Libor ring a bell with anyone?" one Times reader commented. "Mr. [Geithner] while, chairman of the Federal Reserve Bank of New York, and bank regulators in Britain knew about the gamed system at least one year before being reported publicly. If Mr. Lawsky, 'jumped the gun,' precedent justified his actions."

Another commenter simply wrote, "Are federal banking and market regulators part of the problem or part of the solution?"

As it stands, StanChart is set to appear before New York regulators next week to argue why it should be allowed to keep its state license. You can weigh in on how you feel about the scandal now on BankThink.

Wall Street Journal

Never mind Capital One. British banks are having the worst month ever. StanChart's scandal marks the third time in six weeks a major British bank has been mired in controversy. (Barclays and HSBC, lest you forget, complete the trifecta.) Prior to StanChart's dominance of our daily news cycle, the U.K. government had decided to launch a public inquiry into its banking culture. Industry executives say the new scandals may stymie their ability to stave off new regulations.