Shares in emerging market-focused bank Standard Chartered were dragged lower today after news broke that the bank is the subject of a US Justice Department investigation.
US authorities are investigating the London-based bank over allegations that Indonesian power company Maxpower – owned by Standard Chartered – paid bribes to win contracts between 2012 and 2015.
Shares in the bank closed down by 2.5 per cent in London, however it was already under pressure due to a wider sell off of European banking stocks.
The news couldn't have come at a worse time for Standard Chartered. The bank is currently awaiting a decision from US authorities over whether it will remain under supervision for Iran-related anti-money laundering missteps as part of a deal it reached in 2012.
The bank is due to remain under supervision by an independent monitor until the end of 2017. The bank now expects that date to be extended, possibly by several years, it was reported by Reuters, citing sources.
Under terms of the deal with US authorities Standard Chartered could be prosecuted if it commits a federal crime.
In a statement the bank said:
Standard Chartered takes very seriously allegations of impropriety in any of our private equity investments. We proactively referred this matter to the appropriate authorities and have conducted our own review.
When we receive allegations of improper behaviour in an investee company, we pursue those allegations vigorously and act appropriately, including sharing information and cooperating fully with government authorities and addressing any issues of internal conduct and accountability.
The chief executive of Maxpower worked at Standard Chartered until last year, and the bank holds three seats on the power company’s board.
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Maxpower said the allegations gave a "one-sided and partial view of the operations and events at Maxpower and as such do not give a full, or true view".
Since the restructuring of the company's shareholding and management in mid-2015, the company has implemented robust remedial actions including enhanced internal controls.
We have engaged and continue to work with professional advisory firms to fully investigate issues and questions that have been raised. Accordingly, it would be inappropriate for the company to comment further at this stage.
News of the investigation was first reported by the Wall Street Journal, though that Maxpower executives allegedly organised for bribes to be paid to Indonesian government officials was first reported by the MLex news service in May.