(Adds StanChart comment, full quote from executive paras 3-6)
By Lawrence White
HONG KONG Aug 7 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 was likely to lead to a fine and remedial
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. That's the real purpose of all these sanctions
and surveillance systems and all that," Standard Chartered Asia
CEO Jaspal Bindra said in an interview with Reuters on Thursday.
"We are supposed to police that our counterparties and
clients are not money laundering, and if when we are policing we
have a lapse, we don't get treated like a policeman who's had a
lapse, we are treated like a criminal," Bindra said.
Standard Chartered later distanced itself from his comments.
"We want to be clear that Jaspal Bindra's quote does not
represent the bank's view on anti-money laundering or conduct
regulation. As Group Chief Executive Peter Sands said yesterday,
Standard Chartered is fully committed to playing our role in
supporting the regulatory conduct agenda and the fight against
financial crime," StanChart spokesman Jon Tracey wrote in an
Regulators worldwide are cracking down more harshly on
failures in money laundering controls, with U.S. authorities
imposing increasingly large fines, after being accused of a
They toughened their stance in 2012, when HSBC paid
a hefty $1.9 billion to settle U.S. charges that it allowed
Mexican and Colombian cartels to launder drugs proceeds and
StanChart paid a combined $670 million in settlements to U.S.
authorities over failures in anti-money laundering controls.
HSBC has since pulled out of some business areas and
countries, including Panama, to cut the risk of future problems.
Bindra's 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.
People in the industry have also spoken of unintended
consequences from the regulatory clampdown, including the risk
that lending will be cut to people or businesses in poorer
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.
U.S. authorities have meted out 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.
In its 2012 case, StanChart paid a combined $670 million in
settlements to U.S. authorities. Standard Chartered has made
little comment on those fines since having to apologise in March
2013 for comments made by its chairman.
The U.S. Justice Department and the Manhattan District
Attorney's Office forced the bank to retract and apologise for
comments made by Chairman John Peace, who had told reporters the
bank "had no willful act to avoid sanctions". That contradicted
the bank's acceptance of its crimes, the U.S. authorities said.
(Reporting by Lawrence White; additional reporting by Steve
Slater in London; editing by Edwina Gibbs and Tom Pfeiffer)