Our qualifications help compliance professionals develop relevant knowledge and best practice for operating within the fields of governance, risk and compliance, financial crime prevention and anti money laundering (AML). Awarded in conjunction with the Alliance Manchester Business School, The University of Manchester, you can be assured that you are studying for a worthwhile qualification that is the benchmark of excellence.

ICA is the trusted partner for you and your organisation.

Corporate Certification


Corporate Membership


Insight

Standard Chartered $1.1 billion enforcement action: what lessons can we learn?

Written by Holly Whitehead on Friday April 12, 2019

article sample

On Tuesday 9th April 2019, it was announced that Standard Chartered has agreed to pay more than $1 billion to US regulators and the UK’s Financial Conduct Authority (FCA)

 

This is due to the resolution of a long-running investigation into allegations that the bank repeatedly violated US sanctions on Iran and failed to establish effective anti money laundering (AML) controls. This activity actually took place between 2007 and 2014, after the activity for which Standard Chartered was fined $300 million in 2012.

They agreed to pay $947 million to the US authorities, including the US Department of Justice, for processing transactions in violation of Iranian sanctions; additionally, the FCA has handed down its second largest fine of £102 million to the bank for failures in AML controls.

Standard Chartered said on its website that they ‘accept full responsibility for the violations and control deficiencies’.

 

What can we learn from this?

It has been reported that Standard Chartered has been involved in substantial remediation since mid-2013 and has been working hard to improve its sanctions compliance programme and AML controls. Therefore, the assumption is that they are aware of their mistakes and what must be done to ensure that they don’t happen again.

However, what are the lessons that the rest of us can learn from this case?

The majority of the transactions that violated Iranian sanctions were conducted by two former employees of Standard Chartered. Despite the fact that the bank enacted a policy in August 2007 suspending new Iranian business, these two employees still wilfully conspired with customers of Standard Chartered Dubai to help them conduct USD transactions with Iranian entities using deceptive means. They also helped Iranian nationals located in Dubai open commercial bank accounts, with the knowledge that in some instances the commercial entities were fronts for Iranian businesses.

 

In addition, compliance employees in the United Arab Emirates were aware of the sanctions risks but did not take adequate steps to identify the location of customers at the time that the payment instructions were submitted.

 

Lesson: Ensure that all members of staff have had appropriate, relevant and effective training so that they are not only aware of the risks, but the consequences too. In addition, senior managers should fully understand their regulatory responsibilities regarding financial crime and embed a culture of compliance i.e. implement a ‘tone from the top’. A good culture cannot be underestimated – it can ensure that employees do the right thing, not just because they have to, but because they want to.

 

The FCA claimed that there were ‘serious and sustained’ deficiencies in the bank’s AML controls regarding customer due diligence and ongoing monitoring. These failings exposed Standard Chartered to the risk of breaching sanctions, and in all likelihood enabled the behaviour for which the bank has been fined for by the US.

 

Standard Chartered admitted to processing around 9500 USD transactions for the benefit of Iranian individuals and entities, which totalled approximately $240 million. Over half of these transactions were a consequence of shortcomings in their compliance framework which allowed customers to request USD transactions from within sanctioned countries, in this case, Iran.

 

Lesson: Make sure that there is an effective and robust financial crime compliance framework in place and confirm that there is senior management commitment to, and engagement with, this policy.

 

Although the $1.1 billion fee is eye-watering, Standard Chartered actually anticipated such an outcome, announcing in February that it was setting $900 million aside to cover the However, this does now mean that this final settlement will force the bank to take a further $190 million hit in its first-quarter results.

 

In addition, their Deferred Prosecution Agreement (DPA) – which was actually due to expire on Wednesday – has also been extended by two years.

 

Lesson: As Assistant Attorney General Brian A. Benczkowski stated: ‘If you circumvent U.S. sanctions against rogue states like Iran—or assist those who do—you will pay a steep price’.

 

The FCA reported that it found substantial deficiencies in Standard Chartered’s:

  • internal assessment of the competency of its AML controls

  • approach to identifying and mitigating material money laundering risks

  • escalation of money laundering risks

 

Lesson: Ensure that your oversight of your financial crime controls is extensive, constant and calculated. Understanding the financial crime threat that your firm faces, and your own responsibilities, remain critically important.

 


The ICA International Diploma in Financial Crime Prevention is an advanced level course that will give you the knowledge to develop best practice initiatives and prepare you to face present and future challenges whilst reducing risk.

 

Further reading: 

 


This article forms part of the #BigCompConvo - Join us as we explore and debate the latest challenges and issues facing you and regulatory and financial crime compliance professionals all over the world. If you’d like to contribute an article as part of the Big Compliance Conversation get in touch with us at contributions@int-comp.org

Big Compliance Conversation


Comments:

Please leave a comment

You can leave the name empty should you wish to remain Anonymous.

You are replying to post:

Name

Country

Email *

Comment *



Search posts

View posts by Author


Help and support

Alternatively contact us on +44(0)121 362 7534 / studentservices@int-comp.org (Qualifications)
or +44(0)121 362 7747 / membership@int-comp.org (Membership)