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Stan Chartered warns of more fines ahead

Wednesday, August 06 12:07:16

Standard Chartered has warned it faces another fine from New York's financial regulator for problems related to detecting transactions vulnerable to money laundering, piling more pressure on the Asia-focused bank and its bosses.

The London-based bank said today the New York regulator had identified issues in its surveillance system - part of its anti-money laundering systems and controls - which were likely to result in a fine, remedial action and an extension of a two-year monitoring period.

The monitoring was initially imposed in 2012 after StanChart was fined a total of $667 million by U.S. regulators for breaking U.S. sanctions on Iran by hiding transactions and for lax anti-money laundering systems.

Other banks have also come under fire from U.S. authorities for breaking sanctions and broader conduct mis-steps, including European rivals HSBC, Barclays and UBS .

BNP Paribas was fined a record $9 billion last month by U.S. regulators for breaching sanctions related to Sudan and Iran, and banned from conducting some U.S. dollar transactions.

StanChart's latest problem emerged two years to the day that New York regulator Benjamin Lawsky called the bank a "rogue institution" for the extent of its sanction busting.

Chief Executive Peter Sands said he expected the prospective fine to be less than the $340 million which it paid the regulator in 2012 as a penalty for stripping information from transactions linked to Iran so they would not be detected by U.S. bank filters.

"This is a very different set of issues than we faced in 2012," Sands told reporters on a conference call.

StanChart disclosed the investigation as it reported a 20 percent fall in pretax profit in the six months to the end of June to $3.3 billion. The bank had warned in June that profits would be down by about a fifth as its investment bank revenue was hit by weak trading activity.

The bank has had a rough time since Lawsky shocked it with his original allegations and some investors have called for change at the top.

"Our performance in the first half is clearly disappointing and it's not what we strive for or what our shareholders expect," Sands said.

The bank said losses on bad loans had increased by $264 million to just over $1 billion during the period, with most of the increase due to a writedown of $175 million relating to commodity exposures in China.

The bank last month rejected reports it had stepped up succession plans for its Chairman John Peace and Sands, who has been CEO for 7-1/2 years. It said its board was united behind Sands and Peace in restoring the bank to profitable growth.

StanChart had posted its 10th successive year of record earnings on the back of booming Asian markets just a week before Lawsky's allegations in 2012, having proved relatively immune to the financial crisis of 2008-2009 which hit most global rivals.

More recently, big losses in Korea, a slowdown in investment banking and the impact of tougher regulations have marked a stunning reversal of fortune for the lender.

Income from Korea was down 26 percent or $229 million during the latest period, with operating profit down by $264 million.

StanChart makes more than three-quarters of its profits in Asia, Africa and the Middle East, but expects 2014 profits to fall for a second successive year.

The bank has announced several changes in senior management and shifts in structure and strategy to improve performance.

"We are taking action to get us back on the track of sustainable growth." Sands said, adding the bank was selling non-core assets, cutting costs and sharpening its focus. (Reuters)

For more visit: www.businessworld.ie