StanChart exec: banks treated like 'criminals' for anti-money laundering lapses

HONG KONG Thu Aug 7, 2014 4:17am EDT

HONG KONG Aug 7 (Reuters) - Banks are being penalised too harshly for lapses in anti-money laundering efforts, Standard Chartered Plc's head of Asia operations said - the second senior bank executive this week to voice frustration over what many in the industry see as overzealous regulation.

StanChart said on Wednesday that a computer error in a surveillance system which forms part of its anti-money laundering controls, would likely to lead to a fine and remedial action. It is also set to result in an extension of a two-year monitoring period imposed on the bank in 2012 for breaking U.S. sanctions by hiding transactions linked to Iran.

"Banks have been asked to play the role of policing anti-money laundering...(but when) we have a lapse we don't get treated like a policeman, we are treated like a criminal," Standard Chartered Asia CEO Jaspal Bindra said in an interview with Reuters on Thursday.

His remarks follow comments on Monday by HSBC Chairman Douglas Flint, who argued that regulators' zeal to punish wrongdoing was putting the bank's staff off taking reasonable business risks. Rules that were too harsh could hurt lending in areas such as commercial banking where products can be complicated, he said.

Industry sources have also warned of unintended consequences from the regulatory clampdown, including the threat that lending will be cut to people or businesses in poorer countries.

Bindra said StanChart has addressed its compliance problems by hiring more staff and embarking on a multi-year program to make all 89,000 of its employees more aware of the importance of compliance and anti-money laundering.

The new fine could be between $100 million and $340 million, a source familiar with the matter has previously told Reuters.

"The issue is not so much about whether the U.S. is wrong or right, you have fines in every country, every regulator has fines, but it's the level of fines that is quite difficult for banks," Bindra said.

In the 2012 case, StanChart paid a combined $670 million in settlements to U.S. authorities.

HSBC was fined $1.9 billion in 2012 for breaching U.S. sanctions on money laundering in Mexico, and has pulled out of business areas and countries, including Panama, to cut the risk of future problems.

U.S. authorities have imposed penalties on at least 10 European banks and financial firms for violating U.S. sanctions in regard to countries that include Iran, Sudan and Cuba. (Reporting by Lawrence White; Editing by Edwina Gibbs)