Standard Chartered begins fightback on Iran allegations

Wed Aug 8, 2012 7:18pm EDT
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By Lesley Wroughton and Steve Slater

WASHINGTON/LONDON (Reuters) - Cowboy local regulator or the exposer of lax federal bureaucrats?

That's the key question being asked about New York banking regulator Benjamin Lawsky after his explosive charge that London's Standard Chartered bank abetted $250 billion of money-laundering transactions with Iran.

Standard Chartered won help Wednesday from Britain's central bank governor, who portrayed Lawsky as marching to his own tune, and marching out of step with federal regulators in Washington. "One regulator, but not the others, has gone public while the investigation is still going on," the Bank of England's Mervyn King said at a news conference in London.

Meanwhile, the U.S. Treasury Department, in a letter responding to a request for clarification from British authorities, said it takes sanctions violations seriously.

The British bank lost over a quarter of its market value in 24 hours after Lawsky, the head of New York State's Department of Financial Services, threatened Monday to cancel Standard Chartered's state banking license, which is critical for dealing in dollars. Lawsky called Standard Chartered a "rogue institution" for breaking U.S. sanctions against Iran.

Standard Chartered shares bounced 7.1 percent on Wednesday to close in London at 13.15 pounds, up from a three-year low of 10.92 hit on Tuesday. They were still down 18 percent since the regulator's threat, which Chief Executive Peters Sands said was "disproportionate" and came as a "complete surprise."

The bank's top executives, some like Sands scrambling back from summer vacations, worked on a defense strategy. So far, the executives have contested the regulator's figures and his interpretation of the law, but they have given little further detail. The bank says only a tiny proportion of its Iran-related deals - less than $14 million - was questionable under U.S. sanctions rules.

Sources told Reuters that federal banking regulators in Washington, who had been probing Standard Chartered's Iran-related deals for more than two years, were surprised by the timing of Lawsky's charges and the stridency of his language.   Continued...

An exterior view of the Standard Chartered headquarters is seen in London August 7, 2012. REUTERS/Olivia Harris