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Standard Chartered v New YorkAn unsettling settlementStandard Chartered douses incendiary accusations by paying a $340m fine
Aug 18th 2012 | NEW YORK | from the print editionIT COULD have been a disastrous week for Standard Chartered. It ended up another bad week for finance. The bank faced a hearing before New York state’s Department of Financial Services (DFS) on August 15th to answer the regulator’s allegations that it had illicitly processed at least $250 billion in transactions with Iran between 2001 and 2007, in violation of American sanctions against the country. A hearing would almost certainly have been embarrassing, and could even have led to the loss of its licence to operate in New York, a huge blow to a bank for which an ability to deal in dollars is crucial.
Instead, the hearing was adjourned after Standard Chartered acceded to a rapid settlement of the case, paying $340m in civil penalties and agreeing to the installation of a monitor in its New York branch to evaluate its money-laundering controls. Little else is known. The bank and the DFS issued vague statements, pending a more detailed agreement. How the figure of $340m was reached is anybody’s guess.
The deal gives the DFS a notable scalp, not to mention a considerable financial boost. The state’s self-promoting governor, Andrew Cuomo, responded to the settlement by praising himself for creating the agency. Standard Chartered gains some benefits as well. The bank’s management avoided censure; its shareholders shouldered the fine, which is large but digestible. Its ability to operate through America’s financial system remains intact, removing a big source of uncertainty. Standard Chartered’s share price rose on the news, and has now recaptured over half of the dramatic 22% drop after the accusations were announced on August 6th.
That the shares haven’t fully recovered reflects the nature of the settlement. As part of the agreement, Standard Chartered acknowledged that the amount of Iranian-related transactions at “issue” was indeed $250 billion, the number put forward by the DFS, and not the mere $14m of dodgy payments that the bank initially owned up to. Though this is not the same as admitting that these payments were illicit, reputational damage has been done.
And the settlement does not stop ongoing investigations by four other American regulators: the Federal Reserve, the Treasury, the Justice Department, and the Manhattan district attorney’s office. These could lead to further fines and more bad press. In its initial response to the charges, the bank asserted that it had ceased doing “new” business with Iran five years ago, and that it never did business with people identified “at the time” as terrorists. Both of these carefully worded statements are fodder for clever investigators.
But this odd episode is disturbing for bigger reasons, too. The bank’s initial reaction to the charges was one of indignant denial. If that was merely bluster, the DFS settlement leaves much to be desired in as much as it extracts money from Standard Chartered’s shareholders but imposes no consequences on the people in charge. If the bank’s initial response was justified, however, this settlement is arguably even worse. For that would suggest that when faced with incendiary charges by a critical regulator, and the potential loss of its licence, Standard Chartered felt it had no choice but to pay up. Extracting payments through threats is usually seen as extortion. That a government agency might be the one playing this role is rightly a concern to the whole industry.
http://www.economist.com/node/21560583?fsrc=scn/gn_ec/an_unsettling_settlement
=== < learn English > Monday, 2012.8.20 ======================
scalp n. A bed of oysters or mussels
vt. vi. 剝頭皮
censure n. 責難 vt. 非難,指責
fodder n. 飼料,草料,彈藥
HSBC’s grillingWhat comes out in the washA Senate investigation darkens HSBC’s name, but may signal a brighter futureJul 21st 2012 | NEW YORK | from the print edition
BANKERS to Mexican drug lords, Iran, the Taliban, a Syrian terrorist, Cuba, Sudan, North Korea and Hamas—that was the charge sheet faced by HSBC executives as they became the latest group of financiers to be hauled down to Washington, DC, for public shaming. A scathing 335-page report from a year-long probe was released on July 17th by the Senate’s Permanent Subcommittee on Investigations.
“HSBC’s compliance culture has been pervasively polluted for a long time,” said Senator Carl Levin, who chairs the committee. He claimed that HSBC used its bank in the United States as a gateway into the financial system for illicit money, and he threatened to push for a revocation of the bank’s charter.
Contrition was the primary response. “HSBC’s compliance history,” said Irene Dorner, the head of HSBC’s American bank, “as examined today, is unacceptable.” David Bagley, who headed compliance at HSBC, used his testimony to announce he was stepping down.
HSBC’s new chief legal officer is Stuart Levey, previously the Treasury’s undersecretary for terrorism and financial intelligence. Mr Levey said his arrival was one piece of a comprehensive reorganisation under the bank’s new chief executive, Stuart Gulliver. The overhaul will allow information on suspect clients and transactions, that the bank’s individual country operations had not previously shared, to be pooled.
The bank has boosted its budget for anti-money-laundering compliance in America, to $244m in 2011, a ninefold increase from 2009. Not before time. The report describes a constant struggle for resources by a compliance department vainly attempting to monitor a vast and expanding number of transactions and regulations in the face of efforts by executives to tamp down costs.
One employee who pushed hard for more resources to address festering problems was apparently sacked because of her efforts. Another, cited in 2009 by the bank’s primary regulator, the Office of the Comptroller of the Currency (OCC), as being unqualified, was promoted.
HSBC’s compliance problems were hardly an internal secret. They were flagged numerous times by regulators, but the bank received only the mildest of sanctions in exchange for promises to do better. Senators Levin and Tom Coburn, the two senior members of the committee, slammed the OCC for serving as an ineffectual industry “lapdog”. The Justice Department is pursuing a parallel investigation, and a large fine, relatively speaking (see Free Exchange), is expected.
The report was particularly scathing in two areas. The first concerned more than 25,000 transactions, worth $19.4 billion, that surreptitiously involved Iran, though identifying markers had been scrubbed in violation of American transparency laws. The bank’s Mexican operations were also cited, with billions of dollars of drug money allegedly being transported in cash by the bank through its bulk money-transfer business (since shut down).
In the not-so-distant past, when banks entered “correspondent” relationships with other banks, they typically only required lenders to be licensed. Recently they have been required to become more finicky, particularly in high-risk countries. Mr Levin said HSBC’s American operations should have taken this approach one step further, treating its own affiliates in high-risk regions as it would treat separate high-risk banks. The senator noted that the bank continued to operate in jurisdictions with secrecy laws; he asked whether it could ignore those limitations to meet America’s transparency demands.
This conflict touches on the biggest threat to HSBC. Managerial failings can be corrected, but its greatest asset—its global network and cross-border ties—exposes it to conflicts of law, as politics spills over into commercial activity. Ms Dorner noted that HSBC has recently closed 326 correspondent-banking relationships and 14,000 customer accounts because they failed to meet new standards. That should go some way to mollifying critics, but at the risk that the new-found emphasis on compliance will subject legitimate clients to monstrous amounts of red tape.
But if HSBC can surmount its current troubles, it has huge opportunities. The year-long investigation was cited by the Senate as a test case. Other global banks have had similar problems; smaller banks are even less well-equipped to vet other institutions. Creating a compliance system that can satisfy regulation will not be easy. Companies in poor countries may find that their costs for routine transactions soar. The rare banks that have the resources to operate in this environment will have a business niche to themselves.
http://www.economist.com/node/21559349?fsrc=scn%2Fgn_ec%2Fwhat_comes_out_in_the_wash
< Learn English > Tue, 2012.7.26 ===========
revocation (n.) 廢止,取消,撤回
contrition (n.) 完全悔悟,悔改,悔罪
tamp (vt.) 用粘土填塞,搗固,夯實搗棒,夯
lapdog (n.) 供玩賞用的小狗
scathe (n.) 危害,損傷,損害(vt.)損傷,傷害,痛斥
scrub (n.) 用力擦洗,矮樹,矮人,渺小之物 (vt.)用力擦洗,擦掉,摩擦(vi.)擦洗幹淨
finicky (a.) 過分注意的,過分周到的,過分講究的
mollify (vt.) 平息,緩和,減輕,使鎮靜
surmount (vt.) 戰勝,超越,克服
The stories were taken from the website of The Economist at the URLs stated beneath each story. Copyright remains with The Economist.. The photos cited in this post were taken from internet. 
