NY regulators in fresh talks with Standard Chartered over suspect payments

August 6, 2014, 10:58 AM UTC

Standard Chartered Plc is in trouble with regulators in New York again, less than two years after it paid $667 million to settle charges of money-laundering.

The specialist emerging markets bank, based and listed in London, said Wednesday that it is in talks with regulators over certain higher-risk payments that should have been given more scrutiny.

“Certain issues have been identified with respect to the group’s post-transaction surveillance system, which is part of its anti-money laundering systems and controls and is separate from the group’s sanctions screening systems,” the bank said as it released its second-quarter earnings.

The New York Times has reported that Benjamin Lawsky, the head of the New York Department of Financial Services, is seeking a fine of over $100 million to settle the new issues. Lawsky had called StanChart “a rogue institution” at the time of their first run-in.

Standard Chartered said that it expected an “enforcement action” and a “monetary penalty”. Reuters reported chief executive Peter Sands as telling a conference call later that he expected the fine to be smaller than the $340 million it paid for doctoring records of its transactions with Iran so as to avoid detection by U.S. supervisors.

“This is a very different set of issues than we faced in 2012,” Sands said.

In contrast to the previous problems, the bank said a computer glitch had been responsible for not flagging the new transactions for further examination.

In addition to the fine, Standard Chartered will also likely have to accommodate the regulators’ on-site monitors beyond the two-year term laid out in the Deferred Prosecution Agreement that ended the 2012 issues.

The news is the latest in a series of conduct-related regulatory issues to be faced by European banks in the U.S.. It comes a month after a record $9 billion fine was imposed on France’s largest bank BNP Paribas SA (XXXX) for actively skirting U.S. sanctions on Iran, Sudan and other countries over nearly a decade.

The bank’s shares actually outperformed the broader market despite the news, owing to the fact that its underlying performance was not as weak as had been expected. Standard Chartered had profited for years from its presence in emerging markets and its lack of exposure to the Eurozone.

However, it has struggled to maintain growth since the crisis, and problems in India, Korea and elsewhere have delivered a series of hits to its bottom line, and Sands said the rest of the year would be “challenging”. Its shares have fallen by a third since March last year.

Operating income fell 5% in the first half of the year to $9.3 billion, while ‘adjusted’ pretax profit–which strips out charges against goodwill and valuations adjustments tied to the price of the bank’s own debt–fell to $3.3 billion from $4.1 billion.



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