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3rd Dec 2022

US shames EU bank on money laundering

New York state authorities have exposed a 10-year-long scam by one of the EU's oldest banks to launder money for Iranian clients.

Benjamin Lawsky, the superintendent of the New York State Department of Financial Services, outlined the allegations against Standard Chartered Bank (SCB), a British firm dating back to 1853, in a 26-page-long statement on Monday (6 August).

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  • City of London: one money-laundering expert said EU companies need financial loopholes to do business (Photo: jellybeanz)

Citing internal memos from SCB's own management and lawyers, Lawsky said that between 2001 and 2011 it "designed and implemented an elaborate scheme by which to use its New York branch as a front for prohibited dealings with Iran ... [leaving] the US financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes."

The US imposed sanctions on Iran in 1979 after revolutionaries stormed its embassy in Tehran.

The measures are today part of US efforts to stop Iran from enriching uranium and helping US-designated "terrorist" groups Hezbollah, Hamas and Palestinian Islamic Jihad.

Lawsky said SCB's New York office cleared US dollar transactions for blacklisted firms, such as Central Bank of Iran and Bank Melli, which "originated and terminated in European banks in the United Kingdom and the Middle East."

He said it "hid from regulators roughly 60,000 secret transactions, involving at least $250 billion [€201 billion], and reaping SCB hundreds of millions of dollars in fees."

He noted that it cleared the payments using Swift, a Belgium-based firm which operates international wire transfers.

The internal memos indicate that SCB concealed its real clients by inserting tags such as "NO NAME GIVEN ... NOT STATED ... SCB London" in the relevant box in the Swift messaging system.

When SCB's US chief in October 2006 wrote to its UK director warning that the practice risks "serious criminal liability," the British banker replied: "You fucking Americans. Who are you to tell us, the rest of the world, that we're not going to deal with Iranians?"

Lawsky has summoned SCB to a hearing on 15 August and threatened to suspend its New York licence - a move which would effectively see the bank kicked out of the US.

Meanwhile, SCB said Lawsky did not give "a full and accurate picture of the facts" because there were just $14 million of dodgy transactions.

Reuters news agency noted that the affair is the latest in a string of embarassments for European banks in the US.

UK banks Barclays and Lloyds, Dutch bank ING and Swiss bank Credit Suisse Group have since 2008 paid $1.8 billion in penalties for dealing with blacklisted clients in Cuba, Iran and Sudan.

Brussels confident on oversight

A European Commission spokesman in Brussels on Tuesday said EU banking supervision is up to scratch despite the US revelations.

"We [already] have regulations against money laundering done by banks in the EU or other parts of the world," he said.

The EU in March also prohibited Swift from handling transfers related to almost 20 Iranian banks.

But Iranian banks have 15 cases ongoing against EU sanctions at the Union's court in Luxembourg.

Last week, the EU delisted five Iranian officials, including the former chairman of Iran's Bank Mellat, due to "insufficient evidence."

For his part, Michel Koutouzis, a Paris-based expert on money laundering, told EUobserver that EU bank regulation is a joke and that there is no political will to clean up the sector.

Koutouzis noted that EU firms need shady banks in order to bribe foreign governments to win public tenders.

"I once spoke with the director of a big European multinational, I won't tell you his name, who was hiding money in the Dutch Antilles. He said: 'If we want to be competitive, we need to have money which we can transfer outside the oversight of European Union administrations," Koutouzis said.

"EU governments understand this. You might not like it, but it's reality."

EU proposes €5mn fines for money laundering

Individual staff should be fined up to €5 million and firms, such as banks, should be fined 10 percent of turnover for flouting anti-money-laundering laws, the EU says.

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