UPDATE 1-Standard Chartered to pay $300 mln for oversight shortfalls

Tue Aug 19, 2014 2:13pm EDT

(Adds bank comment, settlement terms, background, bylines)

By Jonathan Stempel and Steve Slater

NEW YORK Aug 19 (Reuters) - British banking company Standard Chartered Plc will pay a $300 million penalty and suspend or exit some important businesses after failing to weed out risky transactions that could be linked to money laundering.

The civil settlement announced on Tuesday by Benjamin Lawsky, the New York State financial services superintendent, came two years after Standard Chartered agreed to pay $667 million to a variety of U.S. regulators to resolve similar charges, including $340 million to Lawsky's office.

A monitor appointed in 2012 uncovered shortcomings in the bank's surveillance systems that caused a "significant number of potentially high-risk transactions" to go undetected, according to a consent order signed by Peter Sands, Standard Chartered's chief executive officer.

"If a bank fails to live up to its commitments, there should be consequences," Lawsky said in a statement. "That is particularly true in an area as serious as anti-money-laundering compliance, which is vital to helping prevent terrorism and vile human rights abuses."

The latest settlement calls for Standard Chartered's New York branch to suspend the processing of dollar-denominated payments, known as dollar clearing, for high-risk business clients at its Hong Kong unit.

Standard Chartered will also end high-risk small- and mid-sized business client relationships in the United Arab Emirates, and obtain approval from Lawsky's office before opening U.S. dollar-clearing accounts for new clients. It will also retain a monitor for another two years.

In a statement, Standard Chartered said it "accepts responsibility for and regrets the deficiencies" in its anti-money laundering surveillance system in New York, and is committed to fix the problems with "utmost urgency."

It also said it "remains fully committed" to the Hong Kong and UAE markets, and that the vast majority of its clients and businesses, as well as its U.S. licenses, are unaffected.

The bank is based in London but makes most of its money in Asia, Africa and the Middle East.

Its monitor is Ellen Zimiles, a Navigant Consulting Inc managing director and former federal prosecutor.

Standard Chartered's earlier settlement with Lawsky resolved charges that it concealed an estimated $250 billion of transactions linked to Iran, violating U.S. sanctions.

U.S. regulators have in recent years also punished other European banks including Barclays Plc, BNP Paribas SA , HSBC Holdings Plc and UBS AG for running afoul of laws against money laundering or doing business with blacklisted countries.

BNP's $8.83 billion settlement is the largest, but Standard Chartered's is unusual by making the bank a repeat offender.

Settlement terms are not expected to be material to Standard Chartered's results, a person familiar with the accord said. (Reporting by Jonathan Stempel in New York and Steve Slater in London; Additional reporting by Karen Freifeld in New York; Editing by Jeffrey Benkoe and Cynthia Osterman)

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