Standard Chartered Bank of London has agreed to pay a forfeit of US$240 million and a fine of US$480 million for conspiring to break the US International Emergency Economic Powers Act, plus other penalties.

The US Department of Justice, which seems to be the prime mover behind this punishment, says that Standard Chartered took part in a criminal conspiracy between 2007 and 2011 in which it processed 9,500 financial transactions worth approximately $240 million through US financial institutions for the benefit of Iranian entities.

The bank already has a deferred prosecution agreement which it signed some time ago with the New York County District Attorney’s Office. This is being extended for an extra two years because the bank broke the IEEPA. For this it must pay an additional financial penalty of $292,210,160. It admits that it broke New York State law by, among other things, falsifying the records of New York financial institutions.  

Stanchart has also signed separate settlement agreements with the Office of Foreign Assets Control, the Federal Reserve, the New York State Department of Financial Services and the British Financial Conduct Authority - for these it must pay additional penalties of more than $477 million. The DoJ is to collect $52,210,160 of that money, in addition to SCB’s $240 million forfeiture.

An unnamed former employee of Stanchart’s branch in Dubai has pled guilty in the District of Columbia for conspiring to defraud the United States and to break the IEEPA. A two-count criminal indictment was also unsealed in a federal court in the District of Columbia that charged an Iranian former customer of Standard Chartered Dubai called Mahmoud Reza Elyassi, 49, with participating in the conspiracy.

With distinct overtones of Lord Palmerston's Civis Britannicus Sum speech, Assistant Attorney General Benczkowski said: “When bank employees and customers conspire to violate US sanctions and subvert our national security, we will bring them to justice no matter where they reside or operate.”

A two-count felony criminal 'information' has been lodged in the District of Columbia which charges Stanchart with illegally conspiring to break the IEEPA.

The first count alleges that it participated in a criminal conspiracy between 2001 and 2007. The Americans first charged Stanchart with this on 10 December 2012. Under the terms of a deferred prosecution agreement signed the same day, the bank agreed to pay a financial penalty of $227 million.  

The second count alleges that Stanchart participated in a criminal conspiracy to break the IEEPA between 2007 and 2011. The authorities say that it intentionally processed US dollar transactions through the US financial system for the benefit of Iranian individuals and entities worth approximately $240 million. In the amended deferred prosecution agreement, Stanchart admitted and accepted responsibility for criminal conduct, agreed to extend the term of the agreement for an additional two years and took on new obligations.

As part of the amended DPA announced today, Stanchart admitted that, from 2007 through 2011, two former employees of its branch in Dubai, willfully conspired to help Iran-connected customers conduct US dollar transactions through the US financial system for the benefit of Iranian individuals and entities. One of these Iran-connected customers was Elyassi, an Iranian national who operated business accounts with SCB’s Dubai branch while residing in Iran.  SCB’s former employees helped Elyassi manage these accounts, concealed their Iranian connections, and facilitated foreign currency transactions in U.S. dollars. SCB’s former employees knew that Elyassi’s business organisations operated from Iran and conducted US dollar transactions for the benefit of Iranian interests, and helped Elyassi disguise his Iranian connections to avoid suspicion.

According to the two-count indictment, Elyassi and his co-conspirators registered numerous general trading companies in the United Arab Emirates and used them as fronts for a money exchange business located in Iran.

Meanwhile, the Financial Conduct Authority has fined Standard Chartered £102,163,200 for breaking its anti-money-laundering rules in two higher risk areas of its business. This is the second largest financial penalty for AML rule breaches ever imposed by the FCA.

The FCA found significant shortcomings in Standard Chartered’s own internal assessments of the adequacy of its AML controls, its approach towards identifying and mitigating material money laundering risks and its escalation of money laundering risks. It was guilty of:

• opening an account with 3 million UAE dirham in cash in a suitcase (more than £500,000) with little evidence that the origin of the funds had been investigated;
• failing to collect enough information on a customer exporting a commercial product which could, potentially, have some sort of military use; and
• not reviewing 'due diligence' on a customer despite repeated red flags such as a blocked transaction from another bank indicating a link to a sanctioned entity.

Standard Chartered’s failings occurred in its British correspondent banking business between November 2010 and July 2013 and in its branches in the UAE between November 2009 and December 2014.