Standard Chartered lost 16 per cent of its share price on the FTSE 100 early this morning, following allegations of covering up financial transactions with the Iranian government.
US regulators have accused the bank of scheming with the government to hide $250bn (£160bn) worth of transactions and reaping hundreds of millions of dollars in fees over nearly a decade.
Shares in the London-listed banking giant dropped more than six per cent last night after the New York state financial services department alleged that from 2001 to 2010 the bank routed 60,000 transactions for Iranian financial institutions despite US sanctions and then “covered up” these payments. The department, led by Benjamin Lawsky, branded the bank “a rogue institution” and has threatened to revoke its US banking licence.
The order, released just before the close of the London markets yesterday, said: “SCB’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 activity.”
It also quotes a senior Standard Chartered official in London who, upon being advised by a North American colleague that its Iran dealings could cause “catastrophic reputational damage”, reportedly replied: “You f***g Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians.”
The New York regulator has called on Standard Chartered to explain the apparent violations and demonstrate why its licence to operate in the state of New York should not be revoked.
A spokesperson for Standard Chartered responded early this morning saying the firm “strongly rejects the position or the portrayal of facts” and ceased all new business with Iranian customers over five years ago.
Standard Chartered is now the second bank in two months to face US criticism for lax money laundering controls. HSBC was recently accused by the US Senate of failing to prevent money laundering from countries including Mexico and Iran.
Joshua Raymond, chief market strategist at City Index, said: “This is a very bad situation from a reputational perspective in that not just they were doing financial transactions with Iran, which was subject to US sanctions, but that they were trying to cover it up.
“But at the moment we are only talking about New York, which is a fairly small percentage of where their revenues are from.”