Standard Chartered is accused by New York’s top financial regulator of helping fund terrorism – and the Iranian variety to boot.
Like HSBC, Standard Chartered had been burnishing its reputation as the best of the British banks – not only untainted by the financial crisis but the bank to which Government ministers turned for advice. Why, chief executive Peter Sands was widely lauded as the brains behind the Balti bail-out – 2008’s emergency rescue for his cash-strapped rivals, washed down with that late-night curry from Ghandi’s in Kennington.
Now it’s Sands’ turn to feel the heat. In a coruscating 27-page missive, colourfully penned by Benjamin M Lawsky of the New York Department of Financial Services, Standard Chartered stands accused of scheming with the Iranian government and hiding from regulators “60,000 secret transactions, involving at least $250bn”. From this, it claims, the bank made “hundreds of millions of dollars in fees”.
Not only that, the bank’s activities “left the US financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes”.
Things could get trickier too. Although the investigation is so far only focused on rogue state Iran, the regulator claims to have uncovered evidence that “apparently” shows the bank had similar operations going with “US sanctioned countries, such as Libya, Myanmar and Sudan”.
Sure, it’s tempting to dismiss superintendent Lawsky’s charge-sheet as no more than allegations – and ones couched in the typically overblown rhetoric favoured by US regulators. But, its investigation spanning 10 years, is based on 30,000 pages of documents, including emails.
They include one email exchange from October 2006 in which the bank’s US chief voices his fears that dealing with Iran has the “potential to cause very serious or even catastrophic reputational damage to the group”, while exposing management to the risk of “serious criminal liability”. In response, one of the bank’s executive directors is alleged to have “caustically” responded: “You f—ing Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians.” Indeed, Lawsky alleges the bank tried to increase “wallet share” of Iranian business in a scheme codenamed Project Gazelle, while hiding its activities with the help of Deloitte.
Sands did not become chief executive until a month after that exchange. But he was finance director from May 2002, so would appear to be centre stage – as would the now Lord Davies, the former trade minister who was the bank’s chief executive between 2001 and 2006, followed by its chairman until 2009.
Tonight, the bank admitted it did not know “what the outcome will be”. But apart from a big fine, Lawsky is also threatening to kick the bank out of America by revoking its banking licence.
What of Sands’ reputation too? He was being tipped for the Bank of England Governor job. If things turn out to be as bad as they look, even Diamond would have a better chance.