Standard Chartered, one of the United Kingdom’s leading banks, has found itself at the centre of a legal investigation, with new allegations surfacing in US court documents. The bank is accused of facilitating billions of dollars in transactions for funders of terrorist organisations, including Hezbollah, Hamas, al-Qaeda, and the Taliban. These transactions, totalling over $100 billion, allegedly occurred between 2008 and 2013, breaching sanctions against Iran.

Standard Chartered Under Investigation – Government Intervention and Avoidance of Prosecution

In 2012, the bank narrowly avoided prosecution by the US Department of Justice after a secret intervention by Lord Cameron’s government. At the time, George Osborne, then Chancellor, stepped in on behalf of Standard Chartered, resulting in the US authorities deciding against prosecuting the bank. This intervention occurred despite the bank being publicly accused of falsifying transaction data on Swift, an international payment system, to transfer billions through its New York branch for sanctioned entities like the Central Bank of Iran.

New Revelations from Court Filings

Recent documents filed in a New York court have brought to light the extent of Standard Chartered’s alleged misconduct. An independent expert has identified $9.6 billion worth of foreign exchange transactions involving individuals and companies designated by the US government as terrorist financiers. These findings, based on confidential bank spreadsheets first handed to US authorities in 2012 by whistleblowers, challenge previous dismissals by US agencies.

Contradictory Expert Analysis

David Scantling, an independent expert with decades of experience in examining illicit bank transactions for the CIA, has contradicted the US authorities’ stance. In a recent court filing, Scantling revealed that over half a million separate transactions between 2008 and 2013 were “cloaked” in the spreadsheets, meaning they were not immediately visible but could be extracted using simple techniques known to analysts. His analysis highlights transactions involving Iranian banks, companies, and Middle Eastern money exchanges financing designated terrorist organisations.

The case against Standard Chartered gained momentum thanks to two whistleblowers, including Julian Knight, a former executive at the bank. They have accused US government agencies of making false statements to court to have their claim for a whistleblower’s reward dismissed. The US authorities had successfully argued that the allegations did not lead to the discovery of new violations, leading to the case being dismissed as “meritless.”

Shocking New Disclosures

Among the numerous transactions identified were those involving Fatima Fertiliser, a Pakistani company known for selling explosive materials used by the Taliban in roadside bombs. Additionally, the bank allegedly facilitated 73 transactions for a Gambian front company owned by Hezbollah financier Mohammad Ibrahim Bazzi. These revelations have been described as “shocking” by Daniel Alter, former general counsel at the New York Department of Financial Services, who pursued Standard Chartered for breaching sanctions.

Implications and Historical Context

Standard Chartered has a history of breaching sanctions, having admitted to violations in both 2012 and 2019, paying fines exceeding $1.7 billion. Despite this, the bank has consistently denied conducting transactions for terrorist organisations. The recent disclosures cast a new light on the extent of the bank’s misconduct, suggesting a far deeper involvement than previously admitted.

In September 2012, George Osborne wrote to key US officials, including Ben Bernanke, then chair of the Federal Reserve, and Tim Geithner, then US Treasury Secretary. Following these communications, Standard Chartered was fined $300 million but avoided prosecution with a deferred prosecution agreement. This agreement acted as a form of corporate probation, sparing individual executives from prosecution.

The Current Stance as the Investigation Continues

Standard Chartered continues to dispute the whistleblowers’ claims, asserting that previous allegations have been thoroughly discredited by US authorities. The bank remains confident that the courts will reject the latest claims. However, the whistleblowers maintain that the US authorities have committed “a colossal fraud on this court” by denying the provision of previously unknown evidence of undisclosed sanctions violations.

As the legal proceedings unfold, the true extent of Standard Chartered’s alleged involvement in facilitating transactions for terrorist funders may become clearer, potentially reshaping the bank’s legacy and its standing in the global financial community.

Investigation Further Highlights Importance of Having Thorough AML Procedures in Place

Standard Chartered’s investigation is the latest in a number of recent cases where failings by banks have been highlighted in relation to AML and compliance failings. UBS were fined CHF50,000 by Swiss authorities for money laundering failings while Canada’s TD Bank has set aside funds to amid an investigation into their AML procedures and protocols. Its a major concern for regulators across the globe but financial businesses and banks need to have thorough procedures in place to avoid major fines and sanctions. It’s imperative their procedures and effective and crucially compliant, the news of these investigations and fines will certainly offer a stark reminder to businesses and banks about having effective measures in place to combat money laundering.