StanChart in talks to settle Iran laundering probe

NEW YORK/LONDON Tue Aug 14, 2012 1:19am IST

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NEW YORK/LONDON (Reuters) - British bank Standard Chartered (STAN.L) is trying to reach an early settlement over charges it hid $250 billion of transactions tied to Iran, backing down under pressure from U.S. regulators and shareholders.

Despite chief executive Peter Sands's strong denial last week of charges leveled by New York's Department of Financial Services, the bank's U.S. legal team has got as far as discussing a settlement figure with regulators, sources familiar with the situation told Reuters.

A spokeswoman for the bank said talks were continuing on Monday, two days before an expected showdown between the bank and the regulator. "We're still trying to reach a settlement," the spokeswoman said.

Last week, state Financial Services Superintendant Benjamin Lawsky said the bank hid $250 billion of transactions tied to Iran, in violation of U.S. sanctions. He ordered the bank to appear before a hearing on Wednesday to say why its state banking license should not be revoked.

Sands has denied Lawsky's allegations and said the total amount that did not adhere to U.S. sanction laws was less than $14 million. Nevertheless, the bank appeared willing to put its frustrations to one side in pursuit of an early settlement.

The stakes for Standard Chartered are high, given that the loss of its state banking license would effectively cut it off from direct access to the U.S. bank market.

Investors said their preferred option would be an early resolution rather than a battle with the regulator. The bank's shares rose 0.5 percent on Monday to 1,333.5 pence on hopes of a resolution.

"It looks like, rather than fight this in the courts, they're looking to resolve this, hopefully ahead of Wednesday," analyst Vivek Raja at Investec said.

Last week, banking analysts said Standard Chartered could be forced to pay a fine of up to $1 billion to settle the charges.

The settlement talks could still collapse, however, and the hearing could also be postponed to allow more time for negotiation.

The Department of Financial Services has released no details of how Wednesday's hearing will be conducted and David Neustadt, a spokesman for Lawsky, declined to comment on whether the hearing would be open to the public.

The bank is awaiting information on whether executives will be required to attend, and Sands remains in Britain, a person close to the situation said.

The bank is already cooperating in a separate probe dating to 2010 that includes the U.S. Justice Department and the Manhattan district attorney. That investigation is aimed at determining whether Standard Chartered violated U.S. sanctions laws. Talks on a settlement have been taking place separately from the state discussions.

A settlement with federal officials could also result in a multimillion-dollar fine.

Officials for the Justice and Treasury departments and the Manhattan district attorney either weren't available for comment or declined to comment.

Lawsky's order had quoted communications between Standard Chartered officials concerning the potential reputational and legal threats to the bank if it kept doing business with Iranian clients.

Faced with similar accusations, some banks prefer to settle quietly. Barclays Plc (BARC.L), Credit Suisse Group (CSGN.VX), Lloyds Banking Group (LLOY.L), J.P. Morgan Chase & Co. (JPM.N) and ING Bank NV INGBK.UL had agreed in prior years to settlements totaling nearly $2 billion into how those banks allegedly processed money or assets tied to sanctioned countries.

Standard Chartered, by comparison, said last week that Lawsky's "interpretation" that the bank had improperly handled Iranian transactions was "incorrect as a matter of law."

(Additional reporting by Carrick Mollenkamp, Sinead Cruise and Huw Jones; editing by M.D. Golan)

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