But as the damaging allegations that for 10 years it had “schemed” to bypass US anti-money-laundering sanctions and process up to $250 billion on behalf of Iranian clients show, no bank is whiter than white.
Under the shrewd command of Peter Sands, Standard Chartered has enjoyed a little Schadenfreude in recent years as it demonstrated a canny ability to side-step many of the pitfalls that claimed its big banking rivals.
For Sands as chief executive and Sir John Peace, Standard Chartered’s chairman, the New York State Department of Financial Services’ detailed allegations are potentially the most damaging of their stewardship so far.
Being described in the order as a “rogue institution” and one “motivated by greed” and operating “without any regard for legal, reputational, and national security consequences of its flagrantly deceptive actions”, will hit Sands and Peace hard, particularly as such characterizations are diametrically opposed to the culture and way of doing business they have tried to inculcate in the bank.
In a recent interview with Euromoney, Sands described the bank’s proposition thus: “There is a clear connection between what we do as a bank and the impact that has on the companies we work for and the people who bank with us. Underpinning that is a very strong culture and strong set of values. People in the countries we operate in see that translated in the way we do business. It is something that actually informs our interactions with stakeholders, communities, regulators, clients and customers.”
Such sentiment of course makes for uncomfortable reading now in the wake of the allegations, but might come to haunt Sands with a vengeance should the charges be proven. However, Standard Chartered stands defiant.
In stark contrast to HSBC, which has admitted its guilt and is preparing to take the punishment from US regulators for illegally breaching anti-money-laundering sanctions with countries such as Iran and Syria as well moving cash for Mexican drug cartels, Standard Chartered has come out fighting.
In a robust statement, Standard Chartered said it “strongly rejects the position or the portrayal of facts as set out in the order issued by the DFS” and that “it does not believe the order issued by the DFS presents a full and accurate picture of the facts”.
Furthermore, the bank said that throughout the period of 2001-07 it “overwhelmingly” complied with US sanctions and the regulations relating to U-turn payments, and that the total value of transactions that did not follow the U-turn was under $14 million – compared with the DFS’s allegation of $250 billion.
But perhaps the strongest part of the statement, is this: “The Group believes that the interpretation reflected in the DFS’s order, of the U-Turn exemption — a federal regulation administered and enforced by federal authorities — is incorrect as a matter of law.”
And with that the DFS’s allegations look as if they might be contested by Standard Chartered in court, which might in turn mean a long and protracted battle with a potentially huge legal bill at the end.
However, for now, what has happened here highlights a number of issues, and not least the desire, conveyed in the order’s overblown rhetoric, of the DFS’s superintendent, Benjamin Lawsky, to extract his pound of flesh from Standard Chartered.
First, the case illustrates one of the acute dangers of any big international bank doing business in far-flung developing countries and especially a bank that prides itself on its hardwired focus and long presence in Asia, the Middle East and Africa, as Standard Chartered does.
Second, and HSBC’s recent travails support this, is the difficulty with managing risk and compliance procedures across a vast global banking network. One of the criticisms regularly levelled at Standard Chartered by rivals is that it is essentially run as a group of regional fiefdoms and lacks central control, a charge the bank emphatically denies.
Third, and even though they are only allegations at this stage, this affair does raise painful memories of Standard Chartered’s past; during the 1980s and 1990s it suffered a series of knocks and embarrassing blows to its reputation, all painful enough to leave lasting scars on senior management and shareholders.
More recently, Jaspal Bindra, Standard Chartered’s CEO for Asia, was found to have breached the UK’s Financial Services Authority regulations in 2010 over millions of pounds of his personal share dealings in the bank’s stock. A story that Euromoney broke.
Sands and Peace will undoubtedly be concerned at the very serious nature of DFS’s allegations, but that they have come out fighting suggests that they are not prepared to roll over easily and let Standard Chartered’s carefully built-up reputation and position of strength under Sands be dented. Time will tell whether this proves successful or not.