* StanChart to suspend or exit some businesses
* Large amount of suspect transactions came from HK and UAE
* Bank "accepts responsibility for and regrets the
* Board already under pressure following decline in profits
* Analysts say impact on revenue will be minimal
(Adds closing shares, analyst comment)
By Jonathan Stempel and Matt Scuffham
NEW YORK/LONDON, Aug 20 A $300 million fine on
Standard Chartered for lapses in anti-money laundering
controls has piled pressure on the bank's board, coming after a
series of transgressions and a drop in earnings that had
prompted calls for change at the top.
Chief Executive Peter Sands has faced criticism following
big losses in Korea, a slowdown in investment banking and the
impact of tougher regulations. The bank warned in June that
profit would fall in 2014 for a second straight year.
Some investors have already questioned the futures of Sands
and Chairman John Peace, prompting the bank to reject reports in
July that it was stepping up plans for their succession.
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.
"The broader issue is that it creates a distraction for
management. This is an unhelpful development," said Jefferies
analyst Joe Dickerson.
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 Sands.
"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.
A significant amount of the potentially high-risk
transactions the system has failed to detect originated from its
Hong Kong unit and branches in the United Arab Emirates,
according to the statement.
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
retain a monitor for another two years.
The decision will impact a few hundred of StanChart's retail
business clients in Hong Kong, which represent a small
percentage of the bank's client base in the city, an industry
source with direct knowledge of the matter said.
Standard Chartered shares rose following news of the fine,
which had been anticipated, and were up 0.3 percent at the close
of trading in London on Wednesday.
Espirito Santo analyst Shailesh Raikundlia said he expected
the settlement to have a small impact on Standard Chartered's
revenue but said the bank would be prepared to lose that income
to mitigate future conduct risks.
Investec's Ian Gordon said he believed the restrictions in
Hong Kong related to a small subsection of Standard Chartered's
commercial clients business in Hong Kong, the entirety of which
contributed $87 million to the bank's first-half profit.
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, were unaffected.
The bank is based in London but makes most of its money in
Asia, Africa and the Middle East.
Earlier in August, the bank's head of Asia operations,
Jaspal Bindra, said banks were being penalised too harshly for
lapses in anti-money laundering efforts, although StanChart
later distanced itself from his comments.
The Hong Kong Monetary Authority (HKMA), the city's de facto
central bank, said in a statement on Wednesday it had been
closely monitoring Standard Chartered's anti-money laundering
and anti-terrorism financing controls.
"Although we have identified some areas for improvement,
they are not issues that cause significant supervisory
concerns," the HKMA said in a statement.
StanChart's monitor is Ellen Zimiles, a Navigant Consulting
Inc managing director and former federal prosecutor.
The bank'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 foul 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.
(Additional reporting by Steve Slater in London, Karen Freifeld
in New York and Saikat Chatterjee and Anne Marie Roantree in
Hong Kong; Editing by Jeffrey Benkoe, Cynthia Osterman and David