Market value of Britain’s second largest bank Standard Chartered falls by a quarter after Iranian money laundering allegations

 

The market value of Britain’s second largest bank fell by almost quarter today after it was accused by US regulators of laundering $250bn from Iran and behaving like a “rogue institution”.

In the latest blow to the reputation of the City of London Standard Chartered was accused by regulators in New York of leaving the US financial system “vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes” through its “flagrantly deceptive actions” between 2001 and 2010.

The bank, which is second only to HSBC in market capitalisation and has extensive operations across the globe, lost 23 per cent of its value in trading this morning. This was on top of a fall of six per cent in the final minutes of trading yesterday when the news broke.

The bank, which employs nearly 90,000 people worldwide and is primarily focused on Asian markets, has been called to appear before regulators on Monday to explain the apparent violations and defend its licence to trade on the New York Stock Exchange.

The revelations are all the more embarrassing because Standard Chartered largely escaped unscathed from the financial crisis and its senior executives in London have close links to senior politicians in both countries.

Its chief executive Peter Sands was instrumental in advising the Gordon Brown on the initial banking bail out in 2008 and sits as a non-executive director of the board of the Department of Health.

He has been one of the most vocal opponents of new regulations that have been advanced to curb the excesses of the financial sector. He has even been promoted in some quarters as a possible replacement for Sir Mervyn King as Governor of the Bank of England.

This morning John Mann, a member of the Treasury Select Committee, called for an inquiry into what he described as “international money laundering” by British based banks.

“I have no truck whatsoever with British banks profiteering from Iran and Burma, nor with US banks profiteering from drug and illegal arms money or the private accounts of world dictators,” he said.

“The British Parliament should instigate an unbiased and far reaching investigation into money laundering in Britain, involving British banks and the endangering the well being of British interests and the British people.”

In an explosive legal order released yesterday, New York State's Department of Financial Services accused the New York branch of the 160-year-old institution of earning millions of dollars in fees by “conspiring” with Iran in around 60,000 “secret transactions”.

This behaviour, according to the regulator, had been purely “motivated by greed” on the part of Standard Chartered.

The regulator also said it had uncovered evidence of similar schemes by Standard Chartered to conduct business with Libya, Burma and Sudan, all of which have been subject to sanctions by the US.

The findings include a memo sent in October 2006 from the bank's US chief executive to the group executive director in London raising concerns about the activities with Iran.

He said: “Firstly, we believe (the Iranian business) needs urgent reviewing at the group level to evaluate if its returns and strategic benefits are ... still commensurate with the potential to cause very serious or even catastrophic reputational damage to the group."

He added: “Secondly, there is equally importantly potential of risk of subjecting management in US and London (for example you and I) and elsewhere to personal reputational damages and/or serious criminal liability."

The group executive director in London allegedly replied: “You f****** Americans. Who are you to tell us, the rest of the world, that we're not going to deal with Iranians.”

The bank has been threatened with having its US banking licence revoked and has been ordered to appear before the regulator soon to explain these apparent violations. The accusations are the latest blow to the reputation of the British banking sector. In July, a United States Senate panel found that HSBC was used by Iranians looking to evade sanctions and by Mexican drug cartels.

And in June, Barclays was fined £290m by UK and US regulators after the bank admitted that it had manipulated the Libor interest rate, which is used to set the prices of trillions of dollars worth of loans around the world, to inflate the bonuses of traders in its investment bank.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “There is some irony that, a few days after describing its approach as 'boring' at its interim results, Standard Chartered should become embroiled in yet another potential banking scandal.

“The allegations serve to add more risk to an already beleaguered sector.”

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40k: SThree: SThree are a global FTSE 250 busi...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there