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StanChart agrees to hire outside monitor to comply with US laws

NEW YORK - Standard Chartered will comply with a New York Department of Financial Services demand that the bank hire an outside monitor to ensure compliance with US anti-money laundering laws, according to a person familiar with the matter.

The agreement on the monitor, mandated by the regulator in an August 6 order, stems from negotiations between the bank and state officials ahead of an August 15 hearing at which Standard Chartered will be asked to explain why its license to do business in New York shouldn’t be revoked.

New York banking Superintendant Benjamin Lawsky alleged London-based Standard Chartered flouted US banking laws by helping launder about $250 billion in Iranian funds in contravention of US statutes and without proper disclosure. Lawsky is said to seek as much as $700 million to settle the investigation, another person familiar with the case said.

The regulator’s threat panicked the bank’s investors, sent its share price down about 16 per cent the day after and provoked a defiant response from Standard Chartered chief executive pfficer Peter Sands, who said the vast majority of wire transfers identified by Lawsky complied with federal law. The bank’s stock is down about 10 per cent for the week.

According to the terms of the order, the state regulator will select the monitor, and the bank will pay for it and provide access to all compliance and transaction records.

Lawsky hasn’t yet decided which outside monitor should be hired, said the person familiar with requirement, who declined to be identified because the discussions are confidential. The loss of Standard Charter’s New York license would significantly damage the bank’s corporate banking model and could result in a 40 percent drop in earnings, said Chirantan Barua, an analyst at Sanford Bernstein Research in London. Barua has had an underperform rating on the stock since at least March, according to data compiled by Bloomberg. Standard Chartered fell 2.7 per cent on Friday to 1,326.50 pence in London trading. The bank, which had $17.6 billion in income and $5 billion in profit last year, has $40.8 billion in assets associated with its New York branch, according to Lawksy’s order.

As part of an alleged decade of deception, Lawsky asserted in his order that Standard Chartered withheld information about banking transactions for Iranian clients from 2004 to 2007 based on advice given by Deloitte & Touche, an outside consultant.

Jonathan Gandal, a spokesman for Deloitte, said in an e-mailed statement that “Deloitte FAS had no knowledge of any alleged misconduct by any Standard Chartered Bank employees and categorically denies that it aided in any way any violation of law by the bank.”