Pressure increases on Peter Sands as Standard Chartered is hit by new £180m US penalty for failing to prevent money laundering
Standard Chartered has agreed to pay a £180million penalty to the New York financial watchdog for failing to prevent money laundering, piling further pressure on chief executive Peter Sands.
The emerging markets giant was last night hit with a range of sanctions, including a ban on dealing with ‘high risk’ clients through its Hong Kong and United Arab Emirates subsidiaries.
The punishment comes just two years after the bank reached a £205million settlement with the New York Department of Financial Services for breaching US sanctions and allegedly hiding billions of dollars of transactions with Iranian clients. It also paid more than £200million to other US regulators including the US Department of Justice.
Under pressure: Standard Chartered chief executive Peter Sands could lose his job
In a withering statement last night, New York watchdog Benjamin Lawsky - who had previously branded Standard Chartered a ‘rogue institution’ - said: ‘If a bank fails to live up to its commitments, there should be consequences. ‘That is particularly true in an area as serious as anti-money laundering compliance, which is vital to helping prevent terrorism and vile human rights abuses.’
The latest failings were uncovered by an independent monitor who was installed in the bank’s New York branch for two years as part of its last settlement in August 2012.
The regulator said the bank’s surveillance systems failed to flag up suspicious transactions. It said a ‘significant amount of the potentially high-risk transactions’ originated from its Hong Kong subsidiary and the bank’s branches in the United Arab Emirates.
The independent monitor will now be kept in place for another two years, on top of the initial two year term.
Threat: Standard Chartered could lose its US banking licence following the money laundering scandal
Standard Chartered (up 3.5p at 1217.5p) will also have to stop providing US dollar accounts via its New York branch for high risk retail business clients of its Hong Kong subsidiary. It has been ordered to exit ‘high risk’ relationships within certain business lines at its branches in the UAE.
The lender will need the approval of the New York regulator before opening any new US dollar bank accounts for customers of the two subsidiaries.
Standard Chartered said the measures would not have a ‘financially material’ effect. But last night experts said the threat of losing its US banking licence still remained after its latest transgression.
David Buik, a veteran City commentator for broker Panmure Gordon, said: ‘Sands is already under enormous pressure. In light of this it will be very difficult for him to stay on as chief executive. The threat of losing its New York banking licence – which would be devastating – is still there. It could be a case of three strikes and you’re out.’
Earlier this month Sands braced investors for another huge fine, revealing the bank was in negotiations with the New York watchdog.
Announcing a 20 per cent slump in profits in the first half of the year, he said a surveillance system that flags up suspicious transactions to regulators has not been working properly since an upgrade in 2007.
But he insisted he had no plans to quit, despite growing disillusionment from major investors about the bank’s misfiring performance.
A Standard Chartered spokesman said: ‘The Group accepts responsibility for and regrets the deficiencies in the anti-money laundering transaction surveillance system at its New York branch. The Group has already begun extensive remediation efforts and is committed to completing these with utmost urgency.’
But shadow Treasury secretary Chris Leslie said: ‘This an incredibly disappointing re-occurrence of practices that should have been driven out of the banking sector many years ago.’
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