The bank, which last week posted a “record” first half profit, is accused by the New York State Department of Financial Services of concealing tens of thousands of “secret” financial transactions, involving at least $250bn, “reaping SCB hundreds of millions of dollars in fees”.
According to an order released late yesterday afternoon, between 2001 and 2010 the bank’s NY branch was involved in clearing roughly 60,000 transactions on behalf of clients subject to US sanctions including the Central Bank of Iran/Markazi as well as Bank Saderat and Bank Melli, both of which are also Iranian State-owned institutions.
The order said “in its evident zeal to make hundreds of millions of dollars at any cost”, SCB stripped transactions with Iranian clients of information used to identify sanctioned countries, individuals and entities, breaking a series of laws stipulated by the NY State Department in the process. These laws include falsifying business records, evading federal sanctions and offering false instruments for filing.
In the damning missive, the NY State Department said an investigation of the bank, which it describes as a “rogue institution” included a review of 30,000 pages of documents, including internal emails which “describe wilful and egregious violations of law”.
One of the email conversations cited in the order is particularly damaging. An extract from the order follows:
7. In short, SCB operated as a rogue institution. By 2006, even the New York branch was acutely concerned about the banks Iran dollar-clearing program. In October 2006, SCBs CEO for the Americas sent a panicked message to the Group Executive Director in London.
"Firstly,” he wrote, “we believe [the Iranian business] needs urgent reviewing at the Group level to evaluate if its returns and strategic benefits are . . . still commensurate with the potential to cause very serious or even catastrophic reputational damage to the Group.” His plea to the home office continued: “[s]econdly, there is equally importantly potential of risk of subjecting management in US and London (e.g. you and I) and elsewhere to personal reputational damages and/or serious criminal liability.”
8. Lest there be any doubt, SCBs obvious contempt for U.S. banking regulations was succinctly and unambiguously communicated by SCBs Group Executive Director in response. As quoted by an SCB New York branch officer, the Group Director caustically replied: “You f—ing Americans. Who are you to tell us, the rest of the world, that were not going to deal with Iranians.”
The regulator has ordered SCB to appear before it next Wednesday to explain why its banking licence should not be revoked and why its dollar clearing operations should not be immediately suspended. The company must also immediately submit to and pay for an independent, on-premises monitor of the regulator’s selection, which will ensure that SCB’s New York operations fully comply with all BSA/AML requirements.
To view the NY State Department’s order, click here
