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A British bank regulatory skirmish heard round the world may be over soon.
New York’s top banking regulator, who this week charged Standard Chartered with money laundering, has already been fielding calls from officials at the UK bank about settling the matter, sources familiar with the situation said.
In fact, some officials inside the regulator, the New York Department of Financial Services, headed by Benjamin Lawsky, believe the allegations that Standard Chartered covered up $250 billion in transactions with Iran over nearly a decade could be settled by Aug. 15.
That’s when the bank is set to defend the charges.
In a 27-page order, the DFS moved to revoke the bank’s charter — and blasted CEO Peter Sands, referring to his bank as a “rogue institution.”
The charges have sparked a firestorm of criticism of Lawsky, a former prosecutor, by the bank’s supporters.
The case is seen by some officials here in the US as a crucial test of the credibility of the 9-month-old organization created by Gov. Andrew Cuomo.
The allegations may result in a fine higher than the $700 million that the biggest British bank, HSBC, last month said it set aside to pay penalties for similar money laundering allegations.
However, this Standard Chartered case has raised hackles of Lawsky’s fellow Wall Street watchdogs, who are accusing the newbie of not coordinating with other regulators and jumping the gun on a major case.
Manhattan District Attorney Cy Vance and the Treasury Department, as well as the Federal Reserve Bank of New York, were among the offices working toward a global settlement in the Standard Chartered case, sources said.
“We’d been investigating this case even before the DFS was officially created,” said one source.
The DFS, sources said, believes it informed all the parties investigating the Standard Chartered matter and was given the green light to proceed with their orders.
The UK bank has been under investigation since 2010, sources said.
Still, some investigators believe the probe had grown stale, according to sources, and that the DFS wanted to open up the process to public scrutiny as well as pressure the British bank, which serves developing countries in Asia, Africa and the Middle East and which reported a net profit of $2.8 billion in the first half of the year.
Yesterday, with the heat of the attacks on DFS so intense, it seemed unlikely that a settlement would be struck sooner than later.
“[We] fundamentally reject the overall picture and believe there are no grounds for them to take this action, and it would be wholly disproportionate,” Sands said.
Others have described the agency’s move as politically motivated and anti-British banking.
Bank of England’s head, Mervyn King, also chimed in, suggesting that US regulators get their acts together.
“I think all the UK authorities would ask is that the various regulatory bodies that are investigating the particular case try to work together and refrain from making too many public statements until the investigation is complete,” he told Reuters.
Said Lawsky: “This is a case about Iran, money laundering and national security. We will continue to work closely with our law-enforcement partners, both federal and state, in this effort. No bank, big or small, foreign or domestic, is above the law.”