LONDON – Shares in Standard Chartered PLC rallied Wednesday on news that it had agreed to pay $340 million to a New York regulator to settle accusations that it hid illegal transactions with Iran and violated U.S. sanctions law.
The New York State Department of Financial Services had threatened to revoke the bank's license to operate in New York, which would have wiped out Standard Chartered's dollar-based businesses.
The DFS's Superintendent, Benjamin Lawsky, said Tuesday that Standard Chartered Bank will pay the civil penalty to the state and has agreed to strengthen oversight of overseas transactions. A hearing on the issue scheduled for Wednesday in New York City has been adjourned.
Shares in Standard Chartered closed 4.4 percent higher in London trading Wednesday at 1,430 pence. The bank's stock had fallen by nearly 12 percent since the New York regulator announced its charges last week.
However Standard Chartered's dealings with Iran are still being investigated by the U.S. Department of Justice, the Treasury and the Federal Reserve. Analysts said Wednesday that investors are likely to remain cautious about Standard Chartered shares until the other investigations are resolved.
The U.S. imposes financial sanctions on its political enemies to hinder their access to the global financial system. The goal is to choke off banks and other sources of capital, limiting their economic growth and their ability to buy weapons, food and other items available through global trade. Sanctions ensure that U.S. banks don't get involved in the process.
Carl Levin, chairman of the Senate Permanent Subcommittee on Investigations praised the actions of the DFS. "The agency... showed that holding a bank accountable for past misconduct doesn't need to take years of negotiation over the size of the penalty," he said in a statement. "It simply requires a regulator with backbone to act."
In a brief statement to the market, Standard Chartered said Wednesday that it "continues to engage constructively" with the other U.S. agencies.
"While not wishing to down play the magnitude of such a settlement, we think this is an excellent outcome for the group, in terms of the size of the settlement, the fact that the banking license has been retained and the speed with which the issue has been resolved," said Gary Greenwood, analyst at Shore Capital in London.
Richard Hunter, head of U.K. equities at Hargreaves Lansdown Securities, said the bank "appears to have taken its rap on the knuckles and is preparing to move on."
Peter Sands, the chief executive of Standard Chartered, had gone to New York this week to lead the bank's negotiations with the regulator.
Other British banks have faced investigations for possible breaches of U.S. laws.
In its annual report for 2011, HSBC said it was cooperating with investigations by the U.S. Department of Justice, the New York County District Attorney's Office, the Office of Foreign Asset Control, the Federal Reserve and the Comptroller of the Currency regarding past transactions involving Iranian parties and others subject to U.S. sanctions.
In July, HSBC announced a provision of $700 million for possible penalties for violating U.S. money-laundering rules through its Mexican unit and other legal issues. HSBC was fined $28 million by Mexican authorities for its role in laundering drug money.
Two years ago, Royal Bank of Scotland was fined $500 million by U.S. regulators for money-laundering activities of the Dutch bank ABN Amro, which was taken over in 2007 by a consortium led by RBS.
ABN Amro was found to have conspired to handle illegal U.S. dollar transactions for customers from Iran, Libya, the Sudan, Cuba and other countries subject to U.S. sanctions.