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Many Banks Now Under Investigation For Illegal Dealings With Iran

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Many Banks Now Under Investigation For Illegal Dealings With Iran

Recently a lot of banks have been investigated by the US over allegations of violating Iran sanctions. The list is increasing by day, with one after an other of the UK banks joining in. The US embargo of sanctions on Iran dates back to 1979, when the US classified Iran as a country that supports terrorism, under President Jimmy Carter’s government. This has been followed by one fresh batch of sanctions after another, every couple of years, renewed by Bill Clinton and George Bush Jr. The US bans all financial dealings with Iranian entities, and Obama’s executive order forbids any transactions with Iran’s central bank, related to oil trade. The US has also frozen numerous assets of banks and contractors, that it believes support Iranian terrorism.

The banks under investigation are charged with violating the U-turn transactions. The U-turn regulation basically allows the banks in the US to make transactions with Iranian entities by transferring money from Iranian clients to non-Iranian banks in foreign countries, up until 2008.

Standard Chartered PLC (LON:STAN) (LON:STAC) was accused of laundering as much as $250 billion illegally to Iranian entities like, Central Bank of Iran, Bank Melli, and Bank Saderat. The bank’s stock dipped significantly in response to the allegations as they surfaced on August 6th. The shares were down more than 17 percent within the next trading day. But Standard Chartered PLC (LON:STAN) (LON:STAC) has been able to shake off the effects and the share price is rallying. The bank is also suspected of breaching the US sanctions on Libya, Myanmar, and Sudan, by the New York State Department of Financial Services (NYSDFS). The bank is being investigated by the US Justice Department, in collaboration with the Office of Foreign Assets Control (OFAC). OFAC is directly responsible for  enforcing and monitoring all of US sanctions on foreign countries.

Standard steered clear of the LIBOR scandal that engulfed most of the other top English banks. The bank’s top management even boasted about this achievement. The report about NYSDFS cites instances of  conversations between top SC employees as evidence of violation of laundering laws. SC settled the case with NYDFS on August 14th while agreeing to pay $340 million in damages. The bank still faces probes by other US authorities mentioned above.

Just a couple of days ago, it was reported that RBS, aka Royal Bank of Scotland Group plc (NYSE:RBS) (LSE:RBS), will be investigated on charges of violating the clauses of Iran sanctions. In this case, the bank itself was wary of possible violations, and it is rumored that the probe led to dismissal of a senior manager. RBS has had a rough year, it was previously investigated in rigging of LIBOR rate. The present allegations on Royal Bank of Scotland Group plc (NYSE:RBS) (LSE:RBS) are not as big as they were for Standard Chartered. RBS is cooperationg with US and UK authorities in the investigation.

HSBC Holdings plc (LON:HSBA) (NYSE:HBC) is in talks with US authorities over a settlement amount of $700 million. HSBC Holdings plc (LON:HSBA) (NYSE:HBC) was facing investigation that accused the bank of laundering money to drug cartels and terrorists, before the Standard case came up. The bank has allegedly also made illegal transactions with Sudan.

There are several other banks that have been probed over Iran sanction violations in the past years and have reached settlements, among them are Lloyd’s Banking Group Plc (NYSE:LLG) (LSE:LLOY), who paid $350 million in settlements (2009), ABN Amro Bank NV, which paid $ 500 million (2010), Barclays plc (NYSE: BARC) also paid $298 million, Credit Suisse Group AG  (NYSE:CS) paid $536 million (2009), and ING Groep NV (NYSE:NG) paid $619 million in fines.

If HSBC Holdings plc (LON:HSBA) (NYSE:HBC) pays the $700 million, then this would be the largest settlement that has been reached in these cases so far. The continuous trend of a new scandal emerging every month calls for a revisit of the present regulations, and modifications in the way sanction laws are formulated and enforced.

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Tabinda Hussain

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