Standard Chartered was attacked by one of the top lawyers in the City last night for agreeing a quick settlement of the money-laundering allegations that threatened to destroy the bank and warned that it could be forced to pay out billions more before it can properly settle the scandal.
The bank, headquartered in London but with a strong bias towards business in Asia, agreed to pay $340m (£217m) to New York's department of financial services, a little-known regulator that has grabbed the limelight ahead of wider investigations by the Securities and Exchange Commission and the US department of justice, among other agencies.
Peter Sands, the Standard Chartered chief executive, told staff in a memo yesterday morning that the bank had reached the deal "in the best interests of our shareholders, clients, customers and staff".
City observers with experience of Wall Street say the deal may ramp up the appetite of the other watchdogs for greater amounts of blood, with the more senior regulators unlikely to settle for less than Standard Chartered paid to the DFS over allegations that it violated US laws in $250bn worth of trades with Iran.
Although the bank's shares jumped on investor relief that the issue may be resolved quickly, experienced City lawyers warn otherwise.
Simon Morris, a partner with top City law firm CMS Cameron McKenna, said: "This is not a good settlement for Standard Chartered on any measurement. Last week there was a flat denial of wrongdoing, so this would make $340m an immense penalty for the 0.1 per cent of transactions that supposedly slipped through the net. But if you assume some underlying truth in the allegations, then it is a middling settlement; still a hefty price to pay for a continuing licence to run a branch in New York."
Standard Chartered shares rose 56.5p to 1,426.5p but they are still well below the 1,601p they stood at shortly before Benjamin Lawsky of the DFS published his damaging allegations two weeks ago.
Mr Morris says the settlement opens the door to more pain. He added: "Nor is this the end of the story. There are four more US regulators to settle. The allegations extend to breaching Libya, Sudan and Burma sanctions. And the UK regulators will have questions to ask. Are systems and controls now working? Did senior management know about the Iranian business and what does this say about their fitness and properness to remain in charge?"
Standard Chartered says it plans to "engage actively" with the other US regulators who have been investigating breaches of rules on banking transactions with Iran. It is likely to face further fines on top of the DFS one from the New York Federal Reserve, department of justice and the office of foreign asset control. The bank's final bill could amount to £2bn, twice initial estimates, according to some in the City.
There is also a belief in the City that the attack on the bank is part of a wider assault by New York authorities on London. Added Mr Morris: "Mr Lawsky is a new chief of a new regulator anxious to make his mark. He breached all the rules of regulatory process."Reuse content