Wednesday, August 8, 2012

Standard Chartered claims there are 'no grounds' for revoking NY license

The Telegraph reports that Peter Sands, the head of Standard Chartered, acknowledges that 'mistakes were made' and he is 'very sorry', but that doesn't mean there are 'grounds' for revoking the NY license.

With the bank tonight reported to have sought advice as to whether it can take legal action against the regulator, Mr Sands insisted that there were “no grounds” to withdraw its New York licence and that such a ruling would be “disproportionate and wholly inappropriate.”
Clearly, it is a matter of opinion as to whether withdrawing its license is an appropriate response. 
In his first public comments since Benjamin Lawsky, superintendent of the New York State Department of Financial Services (DFS), published his explosive order alleging Standard Chartered laundered $250bn (£160bn) for Iranian clients, Mr Sands said: “There are lots of matters in that order that we don’t recognise or we don’t understand or are fundamentally inaccurate.” 
He said that the DFS assessment “contradicts information we have given them”.
Fascinating statement by Mr. Sands.  The statement indicates that regulators are suppose to believe anything that the banks tell them.
Mr Sands confirmed that Standard Chartered’s executive director of risk mentioned in the order was Richard Meddings, now finance director, but denied that he had described US regulators as “f------ Americans.”
No harm in defending Mr. Meddings since both of them are losing their jobs if money-laundering on a systemic basis occurred.
Mr Sands said it had processed some transactions that had not complied with US anti-money laundering rules but that the total value was in the “tens of millions” not $250bn as alleged by Mr Lawsky.
Wait a minute.  Earlier today the number was not in the tens of millions, but was rather a very precise figure of $14 million from Standard Chartered's state of the art information systems.


At a minimum, this confirms that in the same way that Barclays was willing to lie in its Libor submissions to portray itself as being in better financial shape during the credit crisis, Standard Chartered is willing to lie about how much money it laundered.

At $14 million, it could have been a mistake on a transaction or two.  At tens of millions, we are talking a systemic problem.

How much credibility should be attached to Mr. Sands current statement about the amount of money-laundering that occurred?  Does it matter?

While I am not a lawyer, I would assume that breaking the law is grounds for Standard Chartered to lose its New York license.

We know that Standard Chartered laundered money to what Mr. Sands now claims is the tune of tens of millions.  We also know that money laundering is against the law.

Revoking their NY license seems imminently reasonable because at tens of million we are talking a systemic problem.  By definition, a systemic problem needs to be addressed so that it cannot re-occur and revoking the NY license is the only way for the regulator to guarantee it never happens again.
Standard Chartered was given an important boost by Sir Mervyn King, the Governor of the Bank of England, who criticised the US regulator’s handling of its announcement.
“UK authorities would ask that the various regulatory bodies ... try to work together and refrain from making too many public statements until the investigation is completed,” he said.
It is actually quite distressing that Sir Mervyn King offered his opinion and that his opinion was that taking action on money laundering should wait until the most comatose regulator rouses itself to do something.

Finally, I noticed that UK politicians and regulators have offered up the idea that pursuing money laundering against Standard Chartered is part of a plan by US regulators to weaken London as a financial center for the benefit of New York.

Perhaps UK regulators might pick up the baton and vigorously pursue the US banks involved in manipulating Libor.

There is absolutely nothing better for the financial system than regulators trying to one up each other by enforcing the law.

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