[Treasury, Fed] irate at NY action against Standard Chartered

Reuters ^ | Wed Aug 8, 2012 6:02am EDT

[DeaconBenjamin]

The Treasury Department and Federal Reserve were blindsided and angered by New York's banking regulator's decision to expose Standard Chartered Plc's $250 billion in alleged money laundering transactions tied to Iran.

By going it alone through the order he issued on Monday, Benjamin Lawsky, head of the recently created New York State Department of Financial Services, complicates talks between the Treasury and London-based Standard Chartered to settle claims over the transactions, several of the sources said.

Lawsky's stunning move, releasing embarrassing communications and details of the bank's alleged defiance of U.S. sanctions against Iran, rewrites the playbook on how foreign banks settle cases involving the processing of shadowy funds tied to sanctioned countries. In the past, such cases have usually been settled through negotiation - with public shaming kept to a minimum.

Lawsky said Standard Chartered's dealings exposed the U.S. banking system to terrorists, drug traffickers and corrupt states.

But federal officials's complaints, who were given virtually no notice of the New York move, may provide ammunition for Standard Chartered to portray the allegations as coming from a relatively new and over-zealous regulator.

Given the content of the order - which described Standard Chartered as a "rogue institution" that "schemed" with the Iranian government and hid from law enforcement officials some 60,000 secret transactions over nearly 10 years - the bank may need to come up with a strong defense.

A spokesperson for the Federal Reserve said it had been working closely with various prosecutorial offices on matters involving Iran and other sanctioned entities, but could not comment on ongoing investigations.

White House Press Secretary Jay Carney said the government takes violations of sanctions "extremely seriously" and the Treasury remains in close contact with federal and state authorities on the matter. The Treasury declined to add to that comment.

[DeaconBenjamin]

complicates talks between the Treasury and London-based Standard Chartered to settle claims over the transactions

Translation: now the payoffs ["fines"] are going into their pockets, not ours.

[Timber Rattler]

His agency, these people said, wasn't interested in a quiet pact of the sort reached by federal authorities in recent years.

Yep, time to cut out the corrupt federal enablers.

[mo]

exposition of corruption starting?

[Venturer]

This just complicates the bribes and payoffs.

The Government is in the drug business.