Standard Chartered set for second US fine over sanctions breach

Troubled Asia-focused lender is again in the cross hairs of New York’s top banking regulator

Standard Chartered has admitted it is in line for a second heavy fine from New York banking watchdogs as it reported that first-half profits had fallen by a fifth.

News that the troubled Asia-focused lender is again in the cross hairs of New York’s top banking regulator, Benjamin Lawsky, comes two years to the day after he issued a devastating report accusing the bank of sanctions-busting.

Having initially denied the charges the bank subsequently apologised and paid a $340 million (£201 million) settlement with Lawsky. Further penalties totalling $327 million from the US Department of Justice and the Federal Reserve followed.

Today an embattled Standard Chartered chief executive Peter Sands confirmed “ongoing discussions” with Lawksy over “certain issues with respect to the group’s post-transaction surveillance systems and money laundering controls”.

This, he said, would probably mean an extension of the term of the government monitoring regime the bank is under, plus a financial penalty. But Sands said: “We believe this will be less than in 2012.”

The bank reported adjusted pre-tax profits of $3.3 billion on income of $9.3 billion, down 5 per cent, driven lower by losses in South Korea and a $432 million fall in revenues from the financial markets business.

Despite pouring money into boosting its compliance function, costs increased by just 1 per cent. But loan losses and impairments surged to more than $1 billion.

Sands described the results as “clearly disappointing” and warned that there would be no “quick fix” for the bank’s problems.

“It is not what we strive for and not what our investors expect,” he added, blaming the problems on “continued financial markets weakness, challenges in Korea as we reshape our business there, and an uptick in impairment, largely due to a commodity fraud exposure in China and write-offs relating to pre-crisis strategic investments”.

But with a note of defiance he said: “To put this in context we made more profit in these six months than in the whole 12 months of 2006. We are not struggling to match pre-crisis profitability. We are taking action. It is not knee jerk.”

Sands has been under pressure since reports emerged that shareholders were pressing the board to name a successor. The bank’s board denied this in an unusual announcement to the stock exchange. Following profit warnings and a rash of senior departures, the bank has re-organised, with Sands arguing that the move is already yielding results.

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