By Aruna Viswanatha
WASHINGTON (Reuters) - Standard Chartered Plc agreed to pay $327 million to resolve allegations that it violated U.S. sanctions against Iran, Sudan and two other countries, capping months of legal headaches for the British bank.
The U.S. Justice Department and the New York District Attorney's office said on Monday the bank moved millions of dollars through the U.S. banking system on behalf of customers in the four sanctioned countries.
The fine came on top of a separate payment of $340 million made in August by Standard Chartered to New York's state banking regulator over Iranian sanctions.
Taken together, the two penalties could almost wipe out the bank's profit growth this year. Nevertheless, its shares nudged higher after Monday's announcement, which was in line with payment provisions the bank disclosed last week.
Another British bank, HSBC Holdings Plc , is expected as early as Tuesday to pay around $1.8 billion to resolve U.S. money-laundering allegations, according to people familiar with the planned announcement. The two settlements are part of a growing crackdown of how banks process illicit transactions for certain customers.
Standard Chartered said in a statement the settlement followed nearly three years of "intensive cooperation with regulators and prosecutors."
The scandal erupted in early August, when New York banking Superintendent Benjamin Lawsky said Standard Chartered was a "rogue institution" that had shown contempt for banking regulations, leaving the United States vulnerable to terrorists, weapons dealers and corrupt regimes.
At the time, Lawsky accused the bank of hiding certain information on $250 billion worth of transactions involving Iran and threatened to revoke its state banking license.
In its statement on Monday, Standard Chartered said that the U.S. Treasury Department found only about $24 million of transactions on behalf of Iranian parties and $109 million on behalf of parties in Burma, Sudan and Libya appeared to violate U.S. sanctions laws.
Asked about the two separate penalties on Standard Chartered, one by Lawsky and another by the Justice Department and other agencies, a top official said the Justice Department probe was based on federal law.
"We really did look at it from the violation of federal law," Lanny Breuer, the chief of the Justice Department's criminal division, said in an interview. "We recognize that we have state partners and other partners out there who have to look at these violations from a different prism."
Standard Chartered's shares crashed 30 percent immediately after Lawsky's action in August, wiping some $17 billion off its market value. Since then, they have clawed back most of that fall, but are still 4 percent below their level before the news.
"Hopefully this now draws a line under the issue," said Gary Greenwood, analyst at Shore Capital in Britain. "There's been no obvious damage to the franchise as a result of this."
The agreements announced on Monday described how employees at Standard Chartered raised concerns about the transactions, only to be ignored by the bank.
One such instance came in 2003, regarding Iranian transactions that moved through the bank's Dubai office. "We may not be exactly breaking the law," the employee wrote, "but we may be breaking the spirit of the law and may possibly get our NY branch into hot water."
The Justice Department and the New York District Attorney both agreed to defer charges against the bank, and drop the charges if the bank improves its sanctions compliance and forfeits $227 million.
Standard Chartered entered into a separate $100 million agreement with the U.S. Federal Reserve to resolve allegations that the bank provided "inadequate and incomplete responses" to bank examiners and provided insufficient oversight of its sanctions compliance program.
Adam Kaufmann, the chief of investigations for the New York District Attorney's office, said the $227 million forfeiture was based on Standard Chartered's conduct and did not take into account the $340 million the bank already paid to Lawsky's agency.
"The criminal settlement is $227 million and that's because that's how this bank's conduct compared to other banks' conduct," Kaufmann said.
In similar settlements over sanctions violations, Lloyds TSB Bank Plc has forfeited $350 million, Credit Suisse AG $536 million, Barclays $298 million and ING Bank NV $619 million.
"These cases give teeth to sanctions enforcement, send a strong message about the need for transparency in international banking, and ultimately contribute to the fight against money laundering and terror financing," New York District Attorney Cyrus Vance said.
The U.S. Treasury Department also entered into a settlement to resolve allegations that the bank's London and Dubai offices violated U.S. sanctions against the four countries at issue.
The Treasury Department said it levied a $132 million penalty but deemed that to have been satisfied by the bank's payment to the Justice Department.
(Reporting by Aruna Viswanatha in Washington; Additional reporting by Karen Freifeld in New York and Steve Slater in London; Editing by Eddie Evans, Andrew Hay and Tim Dobbyn)