Shares in Standard Chartered Plc took a 20% dive on 7 August, after the main New York State regulator accused the global bank of collaborating with the Iranian government and hiding $250 billion in financial transactions. The bank will now have to convince the state regulator not to revoke its banking license in New York.
"For almost ten years, Standard Chartered Bank (a wholly owned subsidiary of Standard Chartered,) schemed with the Government of Iran and hid from regulators roughly 60,000 secret transactions, involving at least $250 billion, and reaping ... hundreds of millions of dollars in fees,” stated the report from the New York State Department of Financial Services.
The report went on to say that these “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.”
"We are disappointed about the allegations," says Morningstar banking analyst, Erin Davis. "We’ve historically seen Standard Chartered as among the best managed, most risk-averse global banks, and the New York report seems to indicate that Standard Chartered didn’t stand apart from the rest of the industry as much as it just didn’t get caught. We’re especially worried about the allegations that senior management knew about these risks and tolerated actions to cover them up, rather than swiftly eliminating them," she said.
"At the same time, we note that the allegations cover activities through 2007, when the bank was under different senior leadership than now and when the banking industry generally had much more of a cowboy culture. We’ll closely watch current management’s response to the allegations as we recalibrate our opinion of the firm," said Davis.
