- Author, Andy Verity
- Role, Economics correspondent
A British bank that escaped prosecution for money laundering carried out billions of dollars in transactions for financiers of terrorist groups, US court papers allege.
Standard Chartered, one of Britain’s largest banks, avoided prosecution by the US Department of Justice after Lord Cameron’s government intervened on its behalf in 2012.
New documents filed in a New York court allege that the bank executed thousands of transactions worth more than $100 billion between 2008 and 2013 in violation of sanctions on Iran.
An independent expert has identified $9.6 billion in currency transactions with individuals and companies designated by the US government as funding “terrorist groups” including Hezbollah, Hamas, Al-Qaeda and the Taliban.
In a statement, the bank said it disputes the whistleblowers’ claims because their previous allegations have been “thoroughly discredited” by US authorities.
Violating sanctions
Standard Chartered was publicly accused of falsifying transaction data on Swift – an international payment system used by thousands of financial institutions – to move billions of dollars through its New York branch on behalf of sanctioned entities such as the Central Bank of Iran.
But in September 2012, George Osborne, then chancellor in Lord Cameron’s government, secretly intervened on the bank’s behalf.
Three months later, the US Department of Justice decided not to prosecute the bank.
The currency transactions identified in the pleadings have yet to come to light and there is no suggestion that Mr Osborne or Lord Cameron had any knowledge of these transactions at the time.
The bank has twice admitted to violating sanctions against Iran and other countries – first in 2012 and then in 2019 – and has paid fines totaling more than $1.7 billion. But it has not admitted to conducting transactions for “terrorist” organizations.
The transactions were hidden in confidential bank spreadsheets first handed over to US authorities in 2012 by two whistleblowers, including a former Standard Chartered executive, Julian Knight.
They allege that US government agencies made false statements to a court to have their claim for a whistleblower reward dismissed.
The US authorities involved in the investigation into the bank successfully applied to dismiss their case in 2019. An FBI agent told the court that there had been nothing “indicating or suggesting that the bank had engaged in improper U.S. dollar transactions after 2007.”
US authorities argued that the whistleblower’s allegations “did not lead to the discovery of any new… violations” and the court dismissed the case as “meritless”.
However, an independent analysis by an expert with decades of experience investigating illegal banking transactions for the CIA, David Scantling, contradicts this.
In a lawsuit last Friday, he alleges that the spreadsheets contained records of more than half a million separate transactions between 2008 and 2013 that were “cloaked,” meaning they were not immediately visible in the spreadsheets but could be properly identified with a simple technique. extracted. -known to analysts in his field.
His statement said that among the documents are numerous transactions by Standard Chartered Bank (SCB), “with or on behalf of Iranian banks, Iranian companies and Middle Eastern money exchanges which, according to his statements, [the US government]finance designated foreign terrorist organizations.”
He says SCB processed transactions on a banking front for the Central Bank of Iran after it claimed to have shut down its Iranian operations in 2007.
That happened at the same time that the country was borrowing an average of $2 billion a day from the Term Auction Facility, an emergency program set up by the US government to help banks through the 2007-2009 global financial crisis.
“The newly extracted data simply cannot be reconciled with the government’s statements to the court in this case that the [whistleblowers’ evidence] contains no evidence of undisclosed sanctions violations,” the Scantling statement said.
The transactions include those of a Pakistani fertilizer company, Fatima Fertiliser, known for selling explosive materials used by the Taliban in roadside bombs that have killed or maimed thousands of British and American soldiers in Afghanistan.
SCB, Liverpool FC’s shirt sponsor, also facilitated 73 transactions for a Gambian front company owned by a major Hezbollah financier, Mohammad Ibrahim Bazzi, the documents allege.
Image source, Getty Images
Daniel Alter, a former general counsel at the New York Department of Financial Services, which first prosecuted SCB for sanctions violations, called the new revelations “shocking” and “exponentially worse” than the bank admitted in 2012.
“This shows a terrifying connection not only to commercial entities, but also to terrorist organizations, terrorist front companies for organizations like Hamas, Hezbollah, Al-Qaeda, the Taliban – things that are a regulator’s nightmare – and we didn’t know that : it was never disclosed to us. And that was not reflected in the data we had,” Alter told the BBC. “It’s a completely different story.”
Headquartered in London, SCB primarily serves customers in Africa, the Middle East and Asia.
When Mr Osborne secretly intervened on behalf of the bank, it risked criminal prosecution for money laundering by the US Department of Justice.
On September 10, 2012, Mr Osborne wrote a letter to Ben Bernanke, then chairman of the US central bank, the Federal Reserve, and to US President Barack Obama’s then Treasury Secretary, Tim Geithner. He met them the following month.
Two months later, the bank was fined $300 million but escaped prosecution with a deferred prosecution agreement (DPA), a form of probation for corporations. No individual bank manager was prosecuted.
The same month, Mr Knight approached US authorities with evidence that the bank’s misconduct was far worse than it admitted and continued beyond 2007.
In 2019, the SCB agreed a further DPA covering transactions between 2007 and 2011 and was fined a further $1.1 billion.
‘meritless’
Both the FBI and the US Department of Justice declined to comment. Neither Lord Cameron nor Mr Osborne commented on the report.
SCB said it is “confident that the courts will dismiss these claims.” It said US authorities had previously concluded that the whistleblowers’ claims were “meritless” and “did not demonstrate any violation of US sanctions”.
But the whistleblowers allege that US authorities “committed a colossal fraud on this court by falsely denying” that the whistleblowers had presented “previously unknown, damning evidence.”