Standard Chartered's Consultancy Deloitte Denies Aiding Money Laundering

The CEO of Standard Chartered's consultancy Deloitte challenged allegations by the New York state regulator that it helped the UK-listed bank to deceive regulators, which then allowed the bank to hide nearly a quarter of a trillion dollars worth of transactions tied to Iranian clients by saying that the charges were a "distortions of the facts."

According to an interview in Reuters, Deloitte CEO Joe Echevarria said that the New York State Department of Financial Services (DFS) that cited the consultancy for aiding Standard Chartered in omitting critical details in a report to regulators was "an unfortunate choice of words that was pulled out of context."

"Standard Chartered bank (SCB) carefully planned its deception and was apparently aided by its consultant Deloitte & Touche LLP, which intentionally omitted critical information in its "independent report" to regulators," said the DFS filing. "This ongoing misconduct was especially egregious because - during a key period between 2004 and 2007 - SCB"s New York branch was subject to a formal supervisory action by the Department and the Federal Reserve Bank of New York for other regulatory compliance failures involving the Bank Secrecy Act, anti-money laundering policies and procedures, and Office of Foreign Assets Control (OFAC) regulations."

However, according to an unnamed source cited by Reuters, the DFS "has no plans to bring charges against Deloitte."

The DFS said it conducted an extensive investigation, which included the review of more than 30,000 pages of documents, including internal Standard Chartered Bank (SCB) e-mails, that "describe wilful and egregious violations of law".

"For almost 10 years, SCB schemed with the government of Iran and hid from regulators roughly 60,000 secret transactions, involving at least $250bn, and reaping SCB hundreds of millions of dollars in fees," the DFS said.

"SCB's actions left the US financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes, and deprived law enforcement investigators of crucial information used to track all manner of criminal activity."

Critically, the DFS cited Deloitte a number of times in the filing saying that:

"Having improperly gleaned insights into the regulators' concerns and strategies for investigating U-Turn-related misconduct, SCB asked D&T to delete from its draft "independent" report any reference to certain types of payments that could ultimately reveal SCB's Iranian U-Turn practices. In an email discussing D&T's draft, a D&T partner admitted that "we agreed" to SCB"s request because "this is too much and too politically sensitive for both SCB and Deloitte. That is why I drafted the watered-down version."

Deloitte hit back initially in statement this month saying "contrary to the allegation [Deloitte] absolutely did not delete any reference to certain types of payments" from a final report. Deloitte said the report did not include a recommendation that had been included in a prior draft."

In the Reuters interview, Echevarria said "presumably the facts will bear out that we certainly held up all the standards required and behaved in an ethical and responsible way."

Standard Chartered Prepares for Hearing

Standard Chartered is preparing to defend itself against money laundering allegations from the New York state financial regulator ahead of its scheduled 15 August hearing. Reports also say it has already discussed a settlement amount to resolve the inquiry.

The hearing is widely anticipated as there has been war of words between the New York's Department of Financial Services (DFS), headed up by Benjamin Lawsky and Standard Chartered's CEO Peter Sands have flown back and forth over the last week.

Sands hit back at the New York State regulator at the end of last week, after the DFS accused the group of hiding at least $250bn of transactions tied to Iran, by saying that the bank had not broken US sanctions and that he saw "no grounds" for revoking the lender's licence.

Sands said: "We reject the position and portrayal of facts by the Department of Financial Services (DFS)."

It would be "disproportionate and wholly inconsistent with the actions of other US authorities in other sanctions matters to revoke the bank's New York licence", he added.

Standard Chartered shares have retraced some of the losses it made since the announcement of the change by trading nearly 2 percent higher as of 0725 GMT at 1356.50p. Although, it has recouped some of the 20 percent decline since the beginning of this month, the stock is still down around 8 percent over the last 4 weeks.