Regulators in New York have announced that British bank Standard Chartered will pay a fine of $300 million for failing to rectify anti-money laundering deficiencies as required by the bank?s August 2012 settlement with the regulators.
The fine is among a range of actions taken against the bank, which include suspension of dollar clearing, through its New York branch, for high-risk retail business clients at the bank?s Hong Kong subsidiary as well as severing relations with high-risk clients in the United Arab Emirates.
Standard Chartered will also not accept new dollar-clearing clients or accounts across its operations without prior approval from the New York State Department of Financial Service (NYDFS).
Benjamin M. Lawsky, Superintendent of Financial Services, 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.?
Two years ago, Standard Chartered agreed to pay $340 million to settle claims that it had broken US money-laundering laws by handling transactions for Iranian clients.
In settling the claim, then the largest fine ever collected by a single US regulator in a money-laundering case, Standard Chartered also agreed to put in place a more robust anti-money laundry regime.
But, according to the NYDFS, the bank failed ?to remediate anti-money laundering compliance problems as required in the bank’s 2012 settlement? with the department.
Standard Chartered will now have to ?implement a series of enhanced due diligence and know-your-customer requirements ? such as demanding greater information regarding the originators and beneficiaries of transactions ? for its dollar clearing operations,? an NYDFS statement said.
The NYDFS ordered the bank to ?provide a comprehensive remediation action plan with appropriate deadlines and benchmarks? and to appoint a monitor, reporting directly to the CEO, ?to oversee the remediation?.
The monitor will be in place for two years.
Reacting to the NYDFS?s action, Washington-based advocacy group Global Financial Integrity (GFI) warned that the agreement underscored the fact that fines and monitoring were insufficient for deterring illicit activity at international banks.
?As I noted in August 2012 when the original Standard Chartered settlement was first announced, monitoring and paltry fines are not an effective response in this case,? said Heather Lowe, GFI?s legal counsel and director of government affairs.
?In 2004, Standard Chartered was forced to submit to monitoring by regulators for significant anti-money laundering deficiencies. The illicit activity covered in the August 2012 settlement was happening while the first round of monitoring was already in place.
?Now it appears that the monitoring and fines imposed in 2012 did little to rectify the situation at Standard Chartered. They say that the definition of insanity is doing the same thing over-and-over-again and expecting a different result. The settlement today is a prime example of that.?
GFI explained that the US government must instead hold individuals at the financial institution accountable before they could expect large banks like Standard Chartered to comply with anti-money laundering rules.
?A fine is a cost of doing business, especially when it?s $300 million ? or $340 million, as it was at Standard Chartered in 2012 ? for $250 billion worth of transactions,? added Ms. Lowe.
?The question everyone should be asking is, ?are the people who have been participating in the bank?s illicit activity since 2004?not just the CEO, but also the department managers?still working for the bank and why???
GFI further warned that this problem was not unique to Standard Chartered, but was rather a systemic problem with anti-money laundering enforcement.
The deal follows similar recent settlements with BNP Paribas, Credit Suisse, HSBC, ING, UBS, and Wachovia for facilitating money laundering or tax evasion, in which the banks paid hefty fines while their executives and employees escaped any punishment for their participation.
?Standard Chartered had multiple opportunities over the past decade to clean up its act, and they clearly and repeatedly chose not to do that,? noted GFI Policy Counsel Joshua Simmons.
?The only way to stop this from occurring again at Standard Chartered, or at any other bank, is for any of their employees who knowingly violated the law to face appropriate consequences for their actions.
?There will not be substantial progress on combating money laundering through major financial institutions until individual actors within those banks feel that they will be held accountable for their actions.?