Standard Chartered’s Problems With Suspicious Clients Didn’t Go Away. Just Like These Two Ex-Employees Had Been Saying.

Standard Chartered’s Problems With Suspicious Clients Didn’t Go Away. Just Like These Two Ex-Employees Had Been Saying.

On a summer time morning in 2012, Anshuman Chandra learn a information article a few Saudi Arabian monetary establishment suspected of facilitating the funding of al-Qaeda assaults, together with 9/11. The financial institution was referred to as Al Rajhi, and a US Senate committee cited allegations it had dealt with funds to suicide bombers in Somalia, Sri Lanka, India, and the Philippines.

Chandra was deeply troubled, he mentioned, and never simply because he knew individuals who had died in terrorist assaults. He was disturbed as a result of Chandra labored for Standard Chartered financial institution, and he realized that his employer was doing enterprise with Al Rajhi.

So Chandra warned a supervisor about what he had discovered, he mentioned, however he by no means heard again.

From Standard Chartered’s Dubai workplace, the place Chandra was a consumer providers supervisor, he dug deep into financial institution information. He later discovered, inspecting a yearly revenue report, that in 2009 alone, Standard Chartered earned $2 million from its relationship with Al Rajhi. (Al Rajhi didn’t reply to a request for remark.)

Ishan Tankha for BuzzFeed News

But that wasn’t all. Poring over Standard Chartered’s accounts, he discovered quite a few prospects in Iran, a rustic below US sanctions, and Chandra feared that they too had been not directly supporting terrorist actions.

“I actually got goosebumps,” Chandra mentioned.

This time, he determined to bypass his bosses. He turned to the US authorities.

By the autumn of 2013, Chandra and one other whistleblower, Julian Knight, had handed US authorities hundreds of inner financial institution information that they claimed present Standard Chartered was giving secure harbor to quite a few prospects shifting cash to Iran.

The paperwork got here at a major time. A 12 months earlier, the financial institution had acknowledged its position in concealing tens of hundreds of transactions with companies in Iran. Under menace of felony prosecution, the financial institution had agreed to scrub up its act.

Ultimately, the federal government walked away from the whistleblowers. But the 2 males had flagged actual issues. The financial institution itself, confidential information present, later reported to the US Treasury that it had suspicions about a minimum of 31 corporations contained within the information the whistleblowers had handed over.

Prosecutors finally decided in 2019 that the financial institution had allowed extra unlawful transactions for Iranian shoppers — together with one who had been in Knight and Chandra’s paperwork from 2013.

Taken collectively, the whistleblowers’ accounts and the banks’ Treasury experiences present the depth of the cash laundering issues at Standard Chartered and the extent to which the US authorities offers huge banks a move once they break the principles.

Banks are required to file suspicious exercise experiences, or SARs, once they spot transactions that bear the hallmarks of cash laundering or different monetary misconduct. These confidential experiences, which go to the Treasury Department’s Financial Crimes Enforcement Network, or FinCEN, usually are not by themselves proof of a criminal offense, however they will help investigations and intelligence gathering. The FinCEN Files investigation is predicated on greater than 2,100 of those paperwork that BuzzFeed News shared with the International Consortium of Investigative Journalists and greater than 100 newsrooms all over the world.

After the whistleblowers handed alongside their information, together with transaction spreadsheets and consumer lists, the FBI pursued an investigation. But it was short-lived. An agent who was wanting into the financial institution mentioned their paperwork didn’t present proof of latest unlawful transactions. A decide just lately issued a ruling blocking Knight from a possibility for whistleblower compensation.

“If they analyzed the data, they could have stopped this much earlier.”

In response to detailed questions from BuzzFeed News, Standard Chartered mentioned in a press release, “We take our responsibility to fight financial crime extremely seriously and have invested substantially in our compliance programmes.” A spokesperson added that the financial institution information SARs “when circumstances warrant and that means our screening and monitoring systems are working as intended.”

The financial institution mentioned it employs 2,000 individuals worldwide to detect and report suspicious transactions, and that “U.S. and U.K. authorities have publicly acknowledged” that the financial institution “has undergone a comprehensive and positive transformation over the last several years.” Standard Chartered, which like all banks is prohibited from disclosing the contents and even the existence of SARs, didn’t handle lots of the particular allegations on this story.

Knight is interesting the choice on his whistleblower case. Both he and Chandra are pursuing a separate go well with alleging that the financial institution retaliated towards them for his or her disclosures.

They say the choice to come back ahead wreaked havoc on their lives — and so they don’t know why the federal government didn’t dig deeper into their supplies. “I feel betrayed,” Chandra mentioned. “If they analyzed the data,” he added, “they could have stopped this much earlier.”

“These false allegations have been thoroughly discredited by the U.S. authorities who undertook a comprehensive investigation into the claims,” the Standard Chartered spokesperson mentioned.

The FBI didn’t reply to a number of requests for remark. “The Department of Justice stands by its work, and remains committed to aggressively investigating and prosecuting financial crime—including money laundering—wherever we find it,” DOJ spokesperson Matt Lloyd mentioned in a press release responding to detailed questions in regards to the FinCEN Files investigation.

A Startling Discovery

Alex Fradkin / Redux for BuzzFeed News

Standard Chartered’s headquarters in London.

The world headquarters of Standard Chartered financial institution stands stolidly on Basinghall Avenue within the coronary heart of the City of London, an imposing fashionable fortress of glass and metal.

The financial institution’s historical past dates again 150 years and tracks the rise of the British Empire. Standard, on the time a separate establishment, banked Cecil Rhodes, the diamond baron who supported insurance policies of racial inequality in southern Africa; Chartered financed the opium commerce, making certain that Britain profited from the drug addictions of hundreds of thousands in China, Hong Kong, and India. The mixed corporations now rake in additional than $15 billion in income and make use of 85,000 individuals in 60 completely different markets.

Standard Chartered was one of many few heavyweight banks to emerge unscathed from the 2008 monetary disaster. It prevented a lot of the criticism its opponents obtained for his or her dangerous and misleading mortgage-trading practices, and even managed to earn a revenue all through the crash. In 2012, its CEO mentioned it succeeded as a result of in contrast to its opponents, it noticed “virtue in being boring.”

But in August of that 12 months, the world discovered of one other facet to Standard Chartered. New York state prosecutors introduced that the financial institution had helped its shoppers conceal a minimum of 59,000 monetary transactions, value 1 / 4 of a trillion {dollars}, that probably violated American sanctions towards Iran. The financial institution had made “hundreds of millions of dollars in fees” off these shoppers, the prosecutors mentioned.

The financial institution admitted to having damaged the regulation, however solely up till 2007. The New York regulators had threatened to revoke the financial institution’s enterprise constitution. The punishment would successfully halt its entry to the US greenback market, a loss of life blow for a worldwide monetary establishment.

But, with a promise from Standard Chartered to remain on the straight and slender, and an out of doors monitor maintaining an in depth eye on the financial institution, prosecutors held off bringing any felony costs. New York state issued a high quality of $340 million — a mere 1.3% of Standard Chartered’s income that 12 months. The financial institution was allowed to proceed winding down its enterprise with quite a few Iranian shoppers.

Meanwhile, the financial institution was additionally being investigated by US federal authorities. But Standard Chartered had a well-placed advocate.

Endanger one financial institution, he appeared to recommend, and the entire economic system may endure. 

George Osborne, the UK’s chancellor of the exchequer on the time, wrote a letter to the Federal Reserve copying in Timothy Geithner, then the US secretary of the Treasury, to debate his “concerns.”

The US was coming down awfully laborious on the financial institution, Osborne mentioned, laborious sufficient to hazard its well being. “For a systemically important financial institution,” he wrote, “this could lead to contagion.” Endanger one financial institution, he appeared to recommend, and the entire economic system may endure.

Geithner and Osborne had been each heading to Tokyo for the annual World Bank assembly. Geithner’s briefing notes for that deliberate assembly, later dug up in a congressional probe, clarify that the world’s superpower believed Standard Chartered had crossed a line: “Treasury considers SCB’s conduct surrounding sanctions violations to be reckless and egregious but not the worst we have encountered.”

The Department of Justice and Standard Chartered finally negotiated a deferred prosecution settlement, the US authorities’s most well-liked instrument for getting wayward banks again on observe. Standard Chartered would pay a second high quality — $227 million — however as long as the financial institution saved its nostril clear, there could be no felony prosecution on the federal degree, both, and the financial institution wouldn’t lose its license.

A spokesperson for Geithner informed BuzzFeed News the Treasury secretaries have “no authority over criminal prosecutions” and that “such matters are handled independently by the Department of Justice and the bank regulators respectively.” The spokesperson added that Geithner “did not push for lenient treatment for Standard Chartered from the US government.”

The Handoff

Betty Zapata for BuzzFeed News

Julian Knight at his dwelling in Grantham, England.

Chandra was working within the financial institution’s Dubai workplace when, he mentioned, he heard two of his colleagues speaking a few former colleague named Julian Knight. They had been saying he had blown the whistle on the financial institution.

Knight, a former flight lieutenant in Britain’s Royal Air Force, had risen to develop into one of many world heads of transaction banking at Standard Chartered earlier than getting fired in 2011.

He was dwelling in Germany when he first heard the financial institution was in hassle with prosecutors. Knight didn’t consider that Standard Chartered had stopped banking Iranian shoppers.

He dug out a compact disc that had all the corporate emails, revenue experiences, and transaction spreadsheets he had downloaded earlier than leaving the financial institution. Through a good friend, he handed it to the Treasury Department.

Those information, which have since been reviewed by BuzzFeed News, confirmed that Standard Chartered was working with Iranian shoppers after 2007. What Knight did not know was that the federal government had allowed the financial institution to satisfy its obligations with some Iranian shoppers after 2007. Those shoppers had permission to repay their excellent loans to the financial institution in currencies aside from US {dollars}, or to withdraw their current balances from financial institution accounts that had been in any other case blocked by the US authorities.

Chandra didn’t know all these particulars, both. He simply knew he wanted to talk with Knight. Chandra mentioned that in April 2013 he despatched Knight an e mail and shortly after that handed on the knowledge he had gathered, with the request that it’s handed to the US authorities.

He was visiting Standard Chartered’s Zambia department when he obtained his first e mail from Matthew Komar.

“I am a Special Agent with the FBI who is the case agent on the investigation into Standard Chartered,” Komar wrote in an e mail obtained by BuzzFeed News. “I would like to speak with you.”

Chandra was nervous about talking with Komar, who requested many questions, however the two stayed in contact.

“Need your help urgently for my and family’s safety.”

On October 2, 2013, per week after his first contact with the FBI, Komar gave him some unwelcome information. The FBI had let slip that it was speaking to Chandra. His identify was “inadvertently sent by a member of the investigative team to the Bank’s counsel,” Komar wrote. He mentioned the financial institution’s attorneys had promised to not share the knowledge with their consumer.

Chandra had already emailed Komar, telling him about an sudden scan of Chandra’s pc, the primary of what he mentioned had been quite a few unusual developments at work. “I’m very worried at the moment,” he wrote.

Over the following few months, based on his emails to the FBI, he misplaced entry to sure shared information, he had extra random checks on his laptop computer, and his managers grew hostile towards him.

In October 2014, Chandra reported getting his first loss of life menace. In an e mail to Komar, he quoted the caller saying, “We know you helped Americans, its not good and we will take care of you.”

Chandra wrote to Komar: “Need your help urgently for my and family’s safety.”

Chandra mentioned Komar steered he name the native police. It was the final, Chandra mentioned, that he would hear from Komar for 2 years.

Komar didn’t reply to questions from BuzzFeed News.

Chandra and Knight, angered by how that they had been handled by each the financial institution and the FBI, turned to American courts.

In 2018, Knight filed what is called a qui tam lawsuit below the False Claims Act. He sought compensation for helping the US authorities in its prosecution of the financial institution for sanctions violations. But Komar testified that his data wasn’t helpful, as a result of the investigators weren’t in a position to “corroborate or validate” the whistleblower’s allegations. This previous June, a decide dismissed the case.

A 12 months after submitting that lawsuit, Knight joined with Chandra to file one other, this time accusing Standard Chartered of retaliating towards them, “discrediting them and destroying their careers in the industry.” Knight claimed that the stress of the harassment had taken a critical toll on his well being.

Standard Chartered countered that with the retaliation declare, Knight and Chandra had been simply in search of “another bite at the apple” after the primary lawsuit went south. The financial institution mentioned the 2 former staff weren’t entitled to the protections granted to whistleblowers, as a result of the knowledge they gave the federal government had no worth — and even when Chandra had been a whistleblower, that’s not what precipitated his termination. As for Knight, the financial institution mentioned he had waived his proper to sue when he signed his termination settlement.

The retaliation lawsuit, and any final likelihood of vindication from the courts for Chandra and Knight, remains to be pending.

But one other type of vindication had lengthy been occurring — a lot of it in secret.

The Bank’s Own Suspicions

Alex Fradkin / Redux for BuzzFeed News

Standard Chartered headquarters in London.

Chandra and Knight had expressed considerations about a number of the financial institution’s prospects. It seems comparable suspicions had been being documented by the financial institution itself.

The FinCEN Files present the financial institution filed a minimum of 35 SARs on 31 prospects that appeared within the paperwork Chandra and Knight despatched to the FBI in 2013. These SARs, filed after the whistleblowers had handed their data to the FBI, present the financial institution itself alerting the federal government to questions in regards to the legitimacy of a few of its enterprise.

One of the shoppers included in each the whistleblowers’ paperwork and the financial institution’s experiences was Al Zarooni Exchange. The US authorities barred Al Zarooni from the US monetary system in 2015 for supporting the Altaf Khanani cash laundering group, which is alleged to have funneled “billions of dollars across the globe on behalf of terrorists, drug traffickers, and criminal organizations.”

The Dubai-based firm was accused by the Treasury of laundering money for the Taliban. Two years after the sanctions had been issued, Standard Chartered’s compliance workers filed a suspicious exercise report exhibiting that the financial institution had facilitated “multiple transactions” for Al Zarooni Exchange in 2009 and 2010. During that point, Taliban militants staged violent assaults that killed civilians and troopers. Al Zarooni couldn’t be reached for remark.

Another such consumer was a big diamond dealer accused by prosecutors of black market diamond gross sales, tax evasion, and bribery. In a SAR from January 2017, the financial institution indicated it had reported the corporate’s transactions in a number of prior filings. Between 2014 and 2016, the SAR mentioned, Standard Chartered had moved greater than $4 billion for the corporate.

Some of the 35 SARs mentioning prospects within the whistleblowers’ paperwork mentioned attainable hyperlinks to Iran. One was suspected by the financial institution to have used “fraudulent documents” to cover its commerce with Iran till a minimum of 2014, based on the SAR. Another “may have sought to obfuscate” funds to Iran for the leasing of containers at Iranian airports, based on a 2017 SAR.

The SARs had been being written and reviewed behind a wall of secrecy. But finally a really public repudiation of Standard Chartered’s practices involving Iran would happen.

In April 2019, seven years after Standard Chartered entered into its deferred prosecution settlement, US Attorney Jessie Liu introduced that the financial institution’s transactions for Iranian shoppers had “undermined the integrity of our financial system and harmed our national security.”

The Department of Justice caught with the identical type of punishment it had been utilizing for Standard Chartered since 2012.

Liu’s statements got here as Standard Chartered settled investigations with the Department of Justice, the New York Department of Financial Services, and the UK’s FCA.

The investigations discovered that senior managers within the financial institution’s Dubai workplace hadn’t blocked transactions from Iran after workers found dozens of shoppers used the financial institution’s web platform often known as “Straight-to-Bank” to entry US greenback accounts. The financial institution’s compliance workers, based on the New York prosecutors, had “utterly failed.”

The Dubai workplace is the place Chandra as soon as labored and the place he had first grown uneasy about Standard Chartered’s techniques for thwarting monetary crime. And the Straight-to-Bank system had been recognized by Knight when he tried to name consideration to issues at Standard Chartered. His paperwork present Knight talked about the system in a presentation he ready for regulation enforcement.

The Department of Justice caught with the identical type of punishment it had been utilizing for Standard Chartered since 2012. It levied an array of latest fines and penalties totaling $1.1 billion (lower than a 3rd of the financial institution’s income that 12 months), and prolonged Standard Chartered’s deferred prosecution settlement. It was the sixth time it needed to be prolonged within the house of seven years.

In the press launch asserting the brand new fines, Liu named Mahmoud Reza Elyassi, an Iranian who used accounts in Standard Chartered’s Dubai department. Former Standard Chartered staff knew that Elyassi “conducted U.S. dollar transactions for the benefit of Iranian interests,” the federal government mentioned, “and helped Elyassi disguise his Iranian connections to avoid suspicion.”

Six and a half years earlier, Elyassi’s identify had appeared some other place: Chandra’s disclosures to the FBI — those that the FBI had discarded as nugatory. ●

You may also like...