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UK Bank Accused Of Rogue Deals With Iran

(c) Sky News 2012

Standard Chartered (Xetra: 859123 - news) bank has been accused of hiding $250bn worth of illegal transactions with Iranian banks over nearly a decade.

The New York department of financial services says the bank operated as a "rogue institution", engaged in "deceptive and fraudulent misconduct", and lied to regulators to cover up its actions.

It is now demanding that Standard Chartered demonstrate why its state license should not be revoked.

In documents released by the regulator, department superintendent Benjamin Lawsky said Standard Chartered, "in its evident zeal to make hundreds of millions of dollars at any cost", had "schemed" with Iran's government to cover-up around 60,000 transactions.

Under US law, any financial dealings with Iranian banks are subject to sanctions because of concerns that US institutions could be used to finance the country's nuclear programme or terrorist operations.

The New York regulator alleges that the bank arranged to help the Iranians by omitting or falsifying the name of the client in order to ensure transactions did not raise any red flags.

The department says the bank engaged in prohibited U-turn transactions, where a non-US financial institution transfers funds to a US bank, which then wires money directly to another non-US financial institution.

It also alleges that the practice was sanctioned at the highest levels of Standard Chartered, quoting a bank director who said: "You f*****g Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians?"

Mr Lawsky said the bank's 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 investigation.

A person familiar with the investigation said Standard Chartered must appear before the regulator on August 15, and that it must prove why "despite all its prior activities", it is still fit to practice in New York State.

As well as possibly revoking the bank's license, the regulator has also insisted the bank pay for an independent monitor to make sure it complies with the law.

A spokeswoman for the bank told Sky News: "We will of course be complying with the department's requests."

The bank said it is reviewing its compliance and discussing that with US enforcement agencies and regulators.

A statement said: "The group cannot predict when this review and these discussions will be completed or what the outcome will be."

Standard Chartered is based in London but has a significant operation in New York (Frankfurt: A0DKRK - news) , which includes wholesale banking, corporate finance and the bank’s dollar clearing operation.

A UK Treasury spokesman said: "The findings look extremely concerning and we will be looking closely at the response from Standard Chartered."

This is not the first time a British bank has faced accusations of facilitating illegal foreign transactions.

Last month a US senate banking panel said Mexican drug cartels and Iranian financial institutions had used HSBC (LSE: HSBA.L - news) to get money to the United States.