(Persia Digest) - Standard Chartered is bracing itself for a bumper fine this week that could total hundreds of millions of pounds as it settles US charges over Iranian sanctions violations.
The Guardian writes that the London-headquartered but Asia-focused bank is expected to draw a line under a long-running investigation into sanctions busting by Wednesday when a six-year deferred prosecution agreement (DPA) with US authorities is set to expire.
DPAs allow firms to settle charges with state authorities without facing criminal prosecution. The companies must agree to specified conditions, which can include a fine and their conduct being monitored for a set period.
Standard Chartered announced last month it had set aside $900m (£691m) to cover US and UK penalties, the bulk of which is expected to go towards settlement of US sanctions violations.
The investigation relates to alleged lapses in the bank’s internal controls, which may have allowed clients with “Iranian interests” to conduct business though the bank between 2007 and 2014. It may result in “substantial” fines and “other compliance measures” including restrictions on its operations, according to Standard Chartered’s most recent annual report.
Standard Chartered has already paid $667m in 2012 to settle allegations of sanctions breaches between 2001 and 2007.
Laith Khalaf, a senior analyst at the stockbroker Hargreaves Lansdown, said: “The best estimate we’ve got for the fines facing Standard Chartered at the moment are the provisions made by the bank itself.
“Misconduct charges are a particular difficult cost to predict because there is no way of modelling the regulatory decisions which determine their scale. It makes sense from the bank’s point of view to provide a relatively accurate provision as far as they can, so there’s no nasty surprises for the market. However, we’d expect them to err on the lower side of proceedings, lest they wave a red rag at the regulatory bull.”
Standard Chartered’s share price has fallen below 650p, compared with 845p in early 2018.
The bank originally struck deferred prosecution agreements with both the US Department of Justice and the New York County district attorney’s office in 2012. The deadline for the DPA was extended at least four times in recent years and was most recently set to expire on 31 March 2019. However, a further 10-day extension announced last month brought the deadline to 10 April. Standard Chartered said: “We continue to work constructively with the US authorities to reach a fair resolution.”
It would be the latest fine imposed on Standard Chartered, which was hit with a £102m penalty by the UK’s Financial Conduct Authority over “financial crime control” breaches in February. The lender was also fined $40m in January by New York’s financial watchdog for rigging currency exchange rates between 2007 and 2013. Both of those charges were accounted for in the bank’s $900m provision.
It was also ordered to pay $300m to the New York state Department of Financial Services in 2014 over lapses in its anti-money laundering procedures
British banks – who’s paid the biggest fines?
Here are some of the largest fines brought against UK banks in recent years.
2018 Royal Bank of Scotland reaches a $4.9bn settlement with the US Department of Justice over claims it missold mortgaged-backed securities in the lead-up to the financial crisis.
2017 RBS is ordered to pay $5.5bn to the US Federal Housing Finance Agency for misselling toxic mortgage bonds between 2005 and 2007.
2015 The UK’s Financial Conduct Authority fines Barclays £284m for rigging foreign exchange rates.
2013 RBS is fined £390m by US and UK regulators as part of the Libor-rigging scandal.
2012 HSBC is forced to pay $1.9bn after American prosecutors accuse the bank of anti-money laundering failures and for wilfully flouting US sanctions
2012 Standard Chartered agrees with US authorities to pay $667m to settle alleged sanctions breaches between 2001 and 2007.
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