British banking official says N.Y. claims all wet

Exec denies Iranian-oil sanction-busting

The Bank of England criticized New York financial regulators Wednesday for unilaterally accusing Standard Chartered Plc of illegally laundering oil money for Iran, while the chief executive of the London bank denied claims of systematic sanctions-busting.

On Monday, the New York State Department of Financial Services accused Standard Chartered of laundering $250 billion of Iranian oil money over a decade in defiance of an American order prohibiting such transactions. Standard Chartered might be asked to pay as much as $700 million to resolve the claims, the state agency said.

Peter Sands, Standard Chartered’s chief executive, rejected the U.S. investigators’ central accusation that bank officials had conspired with Iran to evade U. S. sanctions by systematically removing Iranian identification from wire transfers of Iranian cash cleared through its New York office.

In a conference call with journalists, Sands admitted that the bank had violated U.S. sanctions law in about 300 transactions from 200107. But he billed these as errors rather than calculated fraud.

“There was no systematic attempt to circumvent sanctions,” Sands said, describing the 300 cash transfers as

“clearly wrong, and we are sorry that they happened.” But he described the New York regulators’ wider accusations as groundless.

Standard Chartered said about $ 14 million slipped through the cracks.

New York authorities estimate the true scale of deceptive transactions at 60,000 and include deals as recently as 2010. Standard Chartered has operated on Wall Street since 1976 but could lose its U.S. license if found guilty of sanctions-busting. Sands said the charges of wrongdoing had already caused unfair damage to the bank’s reputation.

Standard Charter’s stock tumbled more than 16 percent Tuesday.

In 2003, the Federal Reserve Bank of New York raised concerns about the bank’s money-laundering controls after discovering deficiencies. Standard Chartered entered into an agreement with regulators to shore up its controls and conduct an independent audit of its transactions from 2002-04.

Responding to questions at a news conference Wednesday, Bank of England Gov. Mervyn King suggested that New York authorities had moved too quickly.

“I think all that the U.K. authorities would ask is that the various regulatory bodies that are investigating a particular case try to work together and refrain from making too many public statements until the investigation is completed,” King said. “That seems to be the appropriate time to make clear what the judgment is and what the punishment is.”

King contrasted the New York announcement on Standard Chartered with the coordinated approach taken by American and British agencies to investigate Barclays’ manipulation of the London interbank offered rate, a key interest-rate index known as Libor.

Barclays agreed to pay fines totaling $453 million to settle investigations by the Department of Justice and the Commodity Futures Trading Commission in the United States and the Financial Services Authority in Britain.

“In the Libor [investigation], all the regulators involved, whether it be in the United States or in England, produced coordinated publication of reports which came out after the investigation was completed and they had made their judgments,” King said.

“That’s very different from what’s happened in the Standard Chartered case where one regulator, but not the others, has gone public while the investigation is still going on.”

King said he did not believe that U. S. authorities were singling out British banks for attention.

“Clearly if there has been wrongdoing, then action should certainly be taken,” he said,

The New York State Department of Financial Services was created last October in a reorganization of the state’s bureaucracy for combating financial fraud. The agency supervises some 4,400 institutions.

Standard Chartered said it is cooperating with investigators from the New York Department of Financial Services and four other U.S. authorities: the Department of Justice, the Office of Foreign Assets Control, the Federal Reserve Group of New York and the district attorney of New York.

The bank said it voluntarily approached the agencies in January 2010 “and informed them that we had initiated a review of historical U.S. dollar transactions and their compliance with U.S. sanctions.”

The United States first imposed sanctions on Iran in 1979 in punishment for the protracted hostage-taking of U.S. Embassy staff members in Tehran, and has toughened the restrictions repeatedly to outlaw virtually all financial dealings between U.S. businesses and Iran, even the importation of carpets. Violations can be punished with up to $1 million in fines and 20 years in prison.