By Michael Northcott Tuesday, 07 August 2012

Standard Chartered shares dive amid money-laundering allegations

The price of shares in Standard Chartered has plummeted almost 25% today, after the state regulator for New York accused it of illegally moving Iranian billions around the financial system.

StanChart this morning found itself at the centre of a whirlwind of media attention after the New York state financial regulator accused the bank of illegally moving  $250bn worth of Iranian money around the world financial system. The allegations have panicked investors, whose quick sell-off wiped 25% (more than $7bn) off the bank’s value in just a few hours. The New York State Department of Financial Services reckons the bank kept more than 60,000 transactions with Iranians concealed, and described it as a ‘rogue institution’.

The watchdog pulled no punches in its statement. It said the transactions had ‘[reaped] SCB hundreds of millions of dollars in fees,’ and added, ‘SCB’s actions left the US financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes, and deprived law enforcement investigators of crucial information used to track all manner of criminal activity.’ 

Investors fear that the bank could lose its license to operate using US dollars, meaning it would become practically impossible to function as a wholesale trade bank in Asia. Such a fundamental blow to its infrastructure could theoretically wipe as much as 40% off the bank’s global earnings. In a rebuttal, StanChart said the regulator’s statement did not provide a ‘full and accurate’ version of events. 

Whether or not the alleged concealment actually happened will no doubt be the subject of a long and drawn out investigation, but in the mean time, the allegations are a real blow for StanChart’s squeaky-clean image. In MT’s recent profile of CEO Peter Sands, he extolled the virtues of keeping leveraging low, and focussing relentlessly on ‘client service and relationships’ rather than just the cold hard numbers of the bottom line. This is a bank that has enjoyed profit growth every single year for the last nine years, from $1bn in 2001 to $6.8bn in 2011. 

Isn’t it funny though, how American regulators are so gung-ho to launch investigations into British and other banks, and yet rarely if ever seem to find fault with their own? (Although they have had a pop at Goldman Sachs). This latest round of criticism follows its substantial part in punishing Barclays for the Libor scandal, as well as the possibility of a billion-dollar fine for HSBC over fears that it did not properly insulate itself from terrorist organisations.

Anyone would think the US wanted the whole global financial system owned and operated in America. And only to do business with regimes that are in their good books… 

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