Standard Chartered, one of the UK’s largest banks, has escaped prosecution for money laundering where it carried out billions of dollars of transactions for funders of terrorist groups.
New documents filed to New York court claim thousands of transactions worth more than $100bn were carried out by the bank from 2008 to 2013 in breach of sanctions against Iran.
An independent expert has identified $9.6bn of foreign exchange transactions with individuals and companies designated by the US government as funding “terror groups”, including Hezbollah, Hamas, al-Qaeda and the Taliban.
However, in a statement, the bank said it disputes the whistleblowers’ claims, saying their previous allegations had been “thoroughly discredited” by US authorities.
Sanctions Breached
Standard Chartered was publicly accused of falsifying transaction data on Swift – an international payment system used by thousands of financial institutions – to move billions of dollars through its New York branch on behalf of sanctioned entities such as the Central Bank of Iran.
But in September 2012, George Osborne, then chancellor in Lord Cameron’s government, secretly intervened on the bank’s behalf. Three months later, the US Department of Justice decided not to prosecute the bank.
The foreign exchange transactions identified in the court filings were yet to come to light and it is not suggested that Mr Osborne or Lord Cameron had any knowledge of these transactions at the time.
The bank has twice admitted breaching sanctions against Iran and other countries – first in 2012 and then in 2019 – paying fines totalling more than $1.7bn. But it has not admitted conducting transactions for “terrorist” organisations.
The transactions lay hidden in confidential bank spreadsheets first handed to the US authorities in 2012 by two whistleblowers, including a former Standard Chartered executive, Julian Knight.
They allege US government agencies made false statements to a court in order to have their claim for a whistleblower’s reward dismissed.
The US authorities involved in investigating the bank successfully applied to have their case dismissed in 2019. A FBI agent claimed to a court that it showed nothing that “indicated or suggested that the bank had engaged in improper US dollar transactions” after 2007.
US authorities argued the whistleblower’s allegations “did not lead to the discovery of any new … violations” and the court dismissed the case as “meritless”.
Independent Analysis By An Expert
However, independent analysis by an expert with decades of experience examining illicit bank transactions for the CIA, David Scantling, contradicts that.
In a court filing, he stated that the spreadsheets contain records of more than half a million separate transactions between 2008 and 2013 that were “cloaked”, meaning they were not immediately visible in the spreadsheets but could be extracted through a simple technique well-known to analysts in his field.
David Scantling’s declaration said that among the records are numerous transactions by Standard Chartered Bank (SCB), “with or on behalf of Iranian banks, Iranian companies and Middle Eastern money exchanges that, according to [the US government], finance designated foreign terrorist organisations”.
David Scantling noted that SCB processed transactions for a bank fronting for the Central Bank of Iran after it claimed to have stopped its Iranian operations in 2007.
That happened at the same time it was borrowing an average of $2bn a day from the Term Auction Facility, an emergency programme set up by the US government to support banks through the global financial crisis of 2007-2009.
“The newly extracted data simply cannot be reconciled with the government’s representations to the court in this matter that the [whistleblowers’ evidence] contains no evidence of undisclosed sanctions violations,” the Scantling declaration said.
The transactions include those of a Pakistani fertiliser company, Fatima Fertiliser, known for selling explosive materials that were used by the Taliban in roadside bombs that killed or maimed thousands of UK and US military personnel in Afghanistan.
SCB, the shirt sponsor for Liverpool FC, also facilitated 73 transactions for a Gambian front company owned by a key Hezbollah financier, Mohammad Ibrahim Bazzi, the documents allege.
Daniel Alter, former general counsel at the New York Department of Financial Services, which first pursued SCB for breaching sanctions, called the new disclosures “shocking” and “exponentially worse” than the bank admitted in 2012.
“This shows a frightening connection to not just commercial entities, but terrorist organisations, terrorist front companies for organisations such as Hamas, Hezbollah, al-Qaeda, the Taliban – things that make up a regulator’s nightmare – and we didn’t know that: it was never disclosed to us. And it wasn’t apparent in the data that we had,” Mr Alter said. “It’s a whole different story”.
SCB, which has its headquarters in London, mostly serves customers in Africa, the Middle East and Asia.
When Mr Osborne secretly intervened on the bank’s behalf, it was at risk of criminal prosecution for money laundering by the US Department of Justice.
On 10 September 2012, Mr Osborne wrote to Ben Bernanke, then chair of the US central bank the Federal Reserve, and to then US president Barack Obama’s Treasury Secretary, Tim Geithner. He met them the following month.
Two months later, the bank was fined $300m but escaped prosecution with a deferred prosecution agreement (DPA), a form of probation for corporations. No individual bank executive was prosecuted.
In the same month, Mr Knight approached the US authorities with evidence that the bank’s misconduct was far worse than it had admitted and continued after 2007.
In 2019, SCB agreed a further DPA in relation to transactions between 2007 and 2011 and was fined a further $1.1bn.
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