Standard Chartered Bank Admits Promontory’s Estimates of Its Iran Business Were Wrong

Standard Chartered just settled with NY’s Superintendent of Financial Services. The settlement–for $340 250 million and a monitor of SFS’ choosing–is less than some reports said the settlement might have been.

But here’s the detail I’m most interested in:

The New York State Department of Financial Services (“DFS”) and Standard Chartered Bank (“Bank”) have reached an agreement to settle the matters raised in the DFS Order dated August 6, 2012. The parties have agreed that the conduct at issue involved transactions of at least $250 billion. [my emphasis]

Just a .14% fine, so not that big. But an admission that the scope of the fraud and the Iran business really did amount to $250 billion.

I find that interesting for two reasons. First, because it’s going to cause all kinds of headaches for the folks at Treasury who would like to let SCB off easy but ordinarily base settlements on the amount of the underlying activity.

More importantly, for me, because it demonstrates what a sham the Get Out of Jail Free industry is. A former OCC head and his minions at Promontory Financial Group claimed to have added it all up and determined that SCB only hid $14 million of transactions from Iran. SCB now says that Promontory was wrong.

By orders of magnitude.

Granted, SCB–and most of the people who pay Promontory to soft-pedal their crimes and risk–tried not to admit it had gotten that estimate from Promontory. Going forward, I expect we’ll see Promontory’s clients hide their involvement even more.

Still, this is a useful demonstration of how corrupt the Get Out of Jail Free industry is.

Update: Once again, I got my numbers wrong. The settlement is for $340 million.

Marcy has been blogging full time since 2007. She’s known for her live-blogging of the Scooter Libby trial, her discovery of the number of times Khalid Sheikh Mohammed was waterboarded, and generally for her weedy analysis of document dumps.

Marcy Wheeler is an independent journalist writing about national security and civil liberties. She writes as emptywheel at her eponymous blog, publishes at outlets including the Guardian, Salon, and the Progressive, and appears frequently on television and radio. She is the author of Anatomy of Deceit, a primer on the CIA leak investigation, and liveblogged the Scooter Libby trial.

Marcy has a PhD from the University of Michigan, where she researched the “feuilleton,” a short conversational newspaper form that has proven important in times of heightened censorship. Before and after her time in academics, Marcy provided documentation consulting for corporations in the auto, tech, and energy industries. She lives with her spouse and dog in Grand Rapids, MI.

12 replies
  1. MadDog says:

    EW, I can’t imagine that SCB (or for that matter, any other corporation ever) making an admission against interests out of the goodness of their hearts, can you?

    So you are right on the mark to point out how that niggling little detail of the “conduct at issue involved transactions of at least $250 billion” is a jaw-dropper.

    As far as I know, nobody ever admits the least tiniest bit more than they are forced to.

    Therefore going by that truism in this case, SCB must believe that NY’S DFS either has all the goods on them and/or NY’s DFS has SCB by the short hairs and will proceed to yank away. Really hard!

    The only major downside that appears is the fact that the punishment is that of a civil rather than criminal matter.

    To put shorter words in Mittastic’s mouth: “Corporations are people too…unless they have to go to jail and then they’re not.”

  2. What Constitution? says:

    With a “B”? With “at least” 250 “B’s”?

    If the fine is .1% of the admittedly affected amount and the fine is $250 Million with a “M”, that pretty much makes the “settlement” little more than “BS”, doesn’t it? How about $250 million and life without parole for the executives and clients involved?

  3. BSbafflesbrains says:

    With our “captured” regulatory agencies fines are no more than agreements between friends with a little earnest money added to seal the deal. Google just paid a fine for violating privacy rights which was equivalent to two hours of income.

  4. MadDog says:

    @What Constitution?: When it comes to fining corporations, there is almost no financial penalty that could really be considered as “punishment” as we flesh and blood people understand the term.

    This kind of corporate penance is quickly washed out of the financial books and just as quickly forgotten by the corporate stewards who are greedily busy planning their next foray in pillaging and plunder.

  5. phred says:

    @emptywheel: I’m also intrigued by the use of the phrase “at least” $250 billion, which suggests it could have been considerably more and hence the fine an even tinier fraction.

    Sounds like quite a profitable business model.

  6. What Constitution says:

    Nobody suggests the bank made $250 Billion in profits here, of course, only that the bank’s actions “affected” $250 Billion in transactions which it “facilitated” for its clients. In other words, commissions and/or fees for facilitating and hiding illegal transfers by which somebody else got paid $250 Billion. That, of course, is explained by “boys will be boys” or “but they offered to pay me” or “what do you mean that’s illegal?” Let’s assume the going rate is 5% and, since there’s always a higher rate for risk and these transactions, being illegal and all, sound kind of risky, so … 7% (it’s not like we’re pegging LIBOR here). So, OK, 7% of $250 Billion is, well, um, carry the 3, well, a lot more than .14%, right? Where’s the rest of it, for those who think in terms of disgorging illicit profits as some sort of “justice” thing? And if the bank gets to keep the rest of that 7% money, can’t the bank at least be required to put a sign up in the windows saying “we helped Iran launder money and were damn well paid for doing it”? Some kind of “scarlet A” or something?

    The bank will piously assert, if it can’t avoid any comment at all, that it has compromised a “contested” matter by offering to pay this “substantial” fine of $340,000,000, while the number of “$250 Billion” will be bandied about by others as “proof” of their perfidity. But “how much were they paid here” is the most telling question and the question that puts the “penalty” (or lack thereof) into perspective. Is there public information about how much the bank charged and collected to do what it did? And are any of the entities or persons who made the deals, paid the commissions and profited by the illegal transactions being pursued legally for their role in the laundering? Or should we all look forward, not backward?

  7. rugger9 says:

    The fact it was stipulated is the key point here.

    What it means is that the company admitted to violating the sanctions, which means that the DOJ and their other federal friends have to act as well if for no other reason than because Iran is the bogeyman du jour. Dayen has this as well on FDL News. If Holder does nothing, then Obama gets hit for being soft on [or pallin’ around with] Iran. One wonders how caught up in this Timmy and Ben are, there’s a lot of financial relationships in the Wall Street web.

    Also recall that there are fiduciary responsibilities tied to their business licenses, and something like this cannot be ignored in the future by the various regulators. It will be interesting to see who holds SCB’s feet to the fire on this, and who does not.

    Now also remember that St Ronnie [tm] himself sold F-14 repair parts to Iran in violation of the fact we are still at war with them officially [they still have our embassy, a clear casus belli] in order to finance the Contras, drug runners and assorted other filth.

  8. MadDog says:

    OT – Perhaps a little something for tomorrow’s postings by EW or Jim – via the WaPo:

    Clashes in Yemen highlight ongoing tensions months after president’s ouster

    “Clashes erupted in Yemen’s capital on Tuesday between the new government’s forces and soldiers loyal to the former regime, highlighting the divisions and volatility in the country six months after a populist uprising ousted President Ali Abdullah Saleh.

    Hours after current President Abed Rabbo Mansour Hadi left the country to attend a conference in Saudi Arabia, elite Republican Guard soldiers under the command of Saleh’s son surrounded the Defense Ministry. Government troops quickly moved to protect the building, located in the capital’s center.

    The sounds of gunfire and large blasts punctuated the bustling downtown for nearly an hour before the Republican Guard troops were pushed back. At least three people were killed, according to local news reports.

    The assault came a week after Hadi sought to weaken the authority of Brig. Gen. Ahmed Ali Saleh, the former president’s son, by transferring some of his units to a new presidential protection force…”

  9. earlofhuntingdon says:

    One suspects that the $250 billion figure will come back to haunt this once venerable British bank. The magnitude of the illicit business, more than the fine, lays down a marker. If only there were an uncorrupted prosecutor or twenty who might follow where that leads.

  10. EPU'd says:

    Standard Chartered’s New York nemesis wins deal but makes enemies

    Benjamin Lawsky played hardball with Standard Chartered and a gauntlet of federal and New York regulators and prosecutors right up until the last hours of the $340 Million settlement on Tuesday with the British bank over improper and concealed transactions tied to Iran.

    Lawsky, New York’s top banking regulator, ignored on Monday the entreaties of federal regulators to drop his own action in favor of a single, global settlement. He also insisted on Monday that the bank agree that the settlement specify that it had engaged in $250 Billion of transactions, a figure the bank had vigorously disputed.

    http://www.reuters.com/article/2012/08/16/us-standardchartered-lawsky-idUSBRE87F05B20120816

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