By The Smartencyclopedia Newsroom with Agencies

London, UK — Standard Chartered Bank, a prominent UK-based financial institution, has agreed to pay $1.1 billion in a comprehensive global settlement addressing various sanctions violations. The bank’s transgressions involved illicit transactions benefiting Iranian entities and serious anti-money laundering (AML) breaches.

Settlement Breakdown

The settlement entails Standard Chartered paying $947 million in penalties to U.S. government agencies and an additional £102 million (approximately $133 million) to the UK’s Financial Conduct Authority (FCA). The bank previously set aside $900 million in provisions for these matters in the fourth quarter of 2018 and will incur a further $190 million charge in the first quarter of 2019.

Deferred Prosecution Agreements Extended

Standard Chartered’s deferred prosecution agreements (DPAs) with the U.S. Department of Justice (DOJ) and the New York County District Attorney’s Office have been extended to April 9, 2021. Notably, no new compliance monitorships have been imposed, and existing monitorships by the DOJ and the New York State Department of Financial Services (DFS) were terminated at the end of 2018 and March 2019, respectively.

U.S. Penalties and Violations

The DOJ specified that Standard Chartered will forfeit $240 million and pay a $480 million fine. This includes amending and extending the DPA for conspiring to violate the International Emergency Economic Powers Act (IEEPA). Between 2007 and 2011, Standard Chartered processed approximately 9,500 transactions worth $240 million through U.S. financial institutions for Iranian entities, violating U.S. sanctions.

The New York County District Attorney’s Office additionally levied a $292.2 million penalty. The amended DPA saw Standard Chartered admitting to falsifying records of New York financial institutions and violating New York State law.

Additional Settlements

Standard Chartered has also entered separate settlement agreements with the U.S. Department of the Treasury’s Office of Foreign Assets Control, the Board of Governors of the Federal Reserve System, the DFS, and the FCA. These settlements amount to over $477 million in additional penalties.

FCA Penalty for AML Breaches

The FCA fined Standard Chartered £102.16 million ($133.2 million) for AML failings in its UK Wholesale Bank Correspondent Banking business and its UAE branches. This marks the second-largest financial penalty for AML control failings imposed by the FCA. The FCA identified significant shortcomings in customer due diligence, ongoing monitoring, and risk-sensitive policies.

Examples of AML Failures

• An account was opened with three million UAE Dirhams in cash in a suitcase, without adequate investigation into the funds’ origin.
• Insufficient information was collected on a customer exporting a product with potential military applications to conflict zones.
• Due diligence was not reviewed despite repeated red flags, including a blocked transaction linked to a sanctioned entity.

Oversight and Remediation

FCA’s Director of Enforcement and Market Oversight, Mark Steward, criticized Standard Chartered’s oversight as “narrow, slow, and reactive.” He acknowledged the bank’s remediation efforts and cooperation, which mitigated the financial penalty’s severity.

IEEPA Violations

A former Standard Chartered employee in Dubai pleaded guilty to conspiring to defraud the U.S. and violate IEEPA. The DOJ announced charges against Mahmoud Reza Elyassi, an Iranian national and former customer, for his role in the conspiracy. From 2007 to 2011, Elyassi and co-conspirators used front companies in the UAE to process U.S. dollar transactions for Iranian entities, violating sanctions.

Standard Chartered’s Response

Standard Chartered acknowledged responsibility for the violations, emphasizing that the majority predated 2012. Group Chief Executive Bill Winters stated, “The circumstances that led to today’s resolutions are completely unacceptable and not representative of the Standard Chartered I am proud to lead today.”

Compliance Enhancements

Since 2012, Standard Chartered has significantly bolstered its financial crime compliance program, including:

• Mandatory annual training on sanctions, AML, and anti-corruption for all staff.
• New technology incorporating AI and machine learning for screening and investigations.
• Establishment of a cyber-financial crime intelligence unit in the U.S.

Conclusion

The $1.1 billion settlement underscores the severe repercussions of violating international sanctions and AML regulations. Standard Chartered’s extensive compliance improvements aim to prevent future violations and restore trust in the bank’s commitment to financial integrity.

As Assistant Attorney General Brian Benczkowski stated, “Today’s resolution sends a clear message to financial institutions and their employees: If you circumvent U.S. sanctions against rogue states like Iran—or assist those who do—you will pay a steep price.”