The
US regulatory order also accused StanChart of deficient money
laundering controls in its outsourcing of work to India, which the bank
has refuted.
On the heels of a probe by the US Senate's Permanent Committee on Investigations pointing out major lapses in the work of HSBC's India staff, another UK-based banking giant Standard Chartered's outsourcing of key banking jobs to Indian shores have come under the scanner in the US.
A probe by the New York State's key banking regulator, the Department of Financial Services (DFS), has found deficient money laundering controls in outsourcing of work by StanChart to India, thus exposing the US financial system to terror financing and other risks.
The findings in these two separate probes have come at a time when the voices against outsourcing of jobs to India and other locations are gaining momentum in the US, ahead of the Presidential elections in November.
In an order last night, the DFS accused StanChart of hiding secret transactions involving USD 250 billion with Iran -- leaving the US financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes.
The DFS probe found that SCB had assured the New York state in May 2010 that it would take immediate steps to comply with the US Office of Foreign Assets Control (OFAC) sanctions. However, another regulatory examination in 2011 found continuing and significant Anti Money Laundering failures.
Among these, the bank was outsourcing its "entire OFAC compliance process for the New York branch to Chennai, India, with no evidence of any oversight or communication between the Chennai and the New York offices."
The OFAC is the designated US government agency for preparing list of entities with whom US citizens and entities are barred from doing any business.
Standard Chartered slumps 20% in India
The Standard Chartered Bank stock today plunged by up to 24 per cent in the Indian and UK markets, as the New York state in the US threatened to revoke its licence and charged it of USD 250 billion worth secret transactions with Iran.
At the Bombay Stock Exchange, the scrip fell 19.97 per cent to hit its lowest permissible limit for the day at Rs 83.15. On the NSE, the scrip was down 19.97 per cent at Rs 82.95.
At the London Stock Exchange, Standard Chartered shares plunged 23.9 per cent to 1,119 pence in morning trade.
The New York state has threatened to revoke the bank's licence after charging the UK-based global banking giant of operating as a "rogue institution" and hiding over 60,000 transactions worth USD 250 billion with Iran.
While the bank has refuted the charges saying that more than 99.9 per cent of its Iran-related transactions complied with the US regulations, the New York State Department of Financial Services (DFS) has charged StanChart of exposing the US financial systems to terrorists, drug kingpins and weapon dealers through its transactions with Iran for about 10 years.
In a 27-page order, the Superintendent of Financial Services Benjamin Lawsky of DFS said that "grounds exist for revocation of Standard Chartered Bank's licence to operate in the State of New York and that interim measures must be taken to protect the public interest."
The order accused Standard Chartered of operating as a "rogue institution" which was "motivated by greed."
Reacting to the regulator's order, Standard Chartered said it "strongly rejects" the position and portrayal of facts made by DFS.
