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U.S. Treasury continues to probe Standard Chartered

August 8, 2012: 5:38 PM ET

The U.S. Treasury Department is continuing its investigation into potential violations of U.S. sanctions against Iran by Standard Chartered, according to a letter obtained Wednesday by CNNMoney.

The letter to a top U.K. Treasury official comes days after banking regulators in New York state accused London-based Standard Chartered of helping Iran avoid U.S. economic sanctions by concealing $250 billion worth of transactions over nearly 10 years.

Shares of Standard Chartered (SCBFF) rebounded 7% in London trading Wednesday, following sharp losses on Tuesday.

In the letter, Adam Szubin, director of the Office of Foreign Assets Control, said the Treasury Department is not commenting on the allegations made by the New York Department of Financial Services on Monday. But it is clear from the letter that the Treasury had already been looking into the matter as well.

"We will continue to coordinate with other federal and state agencies, including DFS, in our investigation of the bank and will have no public comment on that investigation until its conclusion," Szubin writes. "We will continue to implement and enforce our sanctions vigorously."

Standard Chartered rejected the New York regulator's claims in a statement Monday. It said it has been reviewing its compliance with U.S. sanctions and is discussing the review with various U.S. regulatory agencies, including the Treasury and DFS. The bank argues that 99.9% of its dealings with Iran were in compliance with U.S. regulations and that only $14 million worth of the transactions in question flowed through the United States.

Related: Why London bankers are shrugging off Standard Chartered threat

Benjamin Lawsky, the superintendent of New York's top banking authority, has come under fire for acting unilaterally. But the department plans to push ahead with its investigation, according to a person close the matter. Standard Chartered executives have been ordered to appear in New York to answer the charges next week.

In his order, Lawsky alleges that Standard Chartered systematically falsified official and business records to conceal transactions involving Iranian clients. The transactions were allegedly routed through the bank's New York branch, in violation of sanctions that forbid U.S. banks from doing business with Iran.

Szubin notes that the order issued by Lawsky's office is predominately focused on potential violations of New York state law. The Treasury's letter is apparently in response to a request for clarification by U.K. authorities of U.S. sanctions against Iran before and after the Treasury department adopted more stringent rules in 2008.

The Treasury has stepped up its efforts to crack down on banks that violate U.S. sanctions over the past few years by manipulating or "striping" documents that would identify Iranian clients, according to the letter.

Related: Banks behaving badly

Specifically, the letter refers to "record-setting penalties" in cases against foreign banks such as ABN Amro in 2005, as well as more recent cases against Lloyds Bank (LYG), Credit Suisse (CS), Barclays (BCS) and ING Bank (ING). All told, the Treasury has brought in over $2 billion in fines and penalties in these cases.

"These cases serve as a powerful deterrent, and we continue to investigate past conduct by offenders," writes Szubin. "We take sanctions violations by financial institutions extremely seriously."

  • Foreign investors pour $102 billion into U.S. assets

    Global demand for U.S. assets remained strong in May, according to the Treasury Department's latest report on foreign holdings.

    Foreign purchases of U.S. assets surged to $101.7 billion in May, compared with net sales of $8.2 billion in April, according to the Treasury International Capital (TIC) report. Private investors bought a total of $60.3 billion, while public institutions purchased $41.4 billion of U.S.assets.

    TIC data measure the flow of funds into and MORE

    - Jul 17, 2012 11:44 AM ET
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