- Author, Andy Verity
- Role, Economic Correspondent
A British bank that escaped prosecution for money laundering carried out billions of dollars in transactions for sponsors of terror groups, US court documents claim.
Standard Chartered, one of Britain’s biggest 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 the bank made thousands of transactions worth more than $100 billion between 2008 and 2013 in violation of sanctions against Iran.
An independent expert has identified $9.6 billion worth of foreign exchange transactions with individuals and companies designated by the US government as financing “terrorist groups”, including Hezbollah, Hamas, al-Qaeda and the Taliban.
In a statement, the bank said it disputed the whistleblowers’ claims, saying their previous allegations had been “thoroughly discredited” by US authorities.
Sanctions violated
Standard Chartered has been publicly accused of falsifying transaction data on Swift – the 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 behalf of the bank.
Three months later, the US Department of Justice decided to prosecute the bank.
The foreign exchange transactions mentioned in the court filings have not yet come to light and there is no suggestion that Mr Osborne or Lord Cameron knew about the transactions at the time.
The bank has twice admitted to violating sanctions against Iran and other countries — first in 2012 and then in 2019 — paying fines totaling more than $1.7 billion. However, it did not admit 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 the court in order to have their whistleblower reward claim dismissed.
US authorities involved in the bank’s investigation successfully asked to have their case dismissed in 2019. An FBI agent claimed to the court that he had not shown anything that “suggests or does not suggest that the bank engaged in improper transactions in US dollars after 2007”.
US authorities claimed that the whistleblower’s allegations “did not lead to the discovery of any new … violations” and the court dismissed the case as “without merit”.
However, an independent analysis by David Scantling, an expert with decades of experience examining illegal banking transactions for the CIA, contradicts this.
In a court filing last Friday, it says the spreadsheets contain records of more than half a million separate transactions between 2008 and 2013 that were “masked,” meaning they weren’t immediately visible in the spreadsheets but could be extracted with a simple technique. -known to analysts in his field.
His statement said the records included numerous transactions carried out by Standard Chartered Bank (SCB), “with or on behalf of Iranian banks, Iranian companies and Middle Eastern exchange offices which, according to [the US government]funds designated foreign terrorist organizations’.
It says SCB processed transactions for a fronting bank for Iran’s central bank after it claimed to have shut down its Iranian operations in 2007.
This happened at the same time that it was borrowing an average of $2 billion a day from the Term Auction Facility, an emergency program created by the US government to support banks during the global financial crisis of 2007-2009.
“The newly extracted data simply cannot be reconciled with the government’s statements to the court in this matter that [whistleblowers’ evidence] contains no evidence of undisclosed sanctions violations,” Scantling said in a statement.
The transactions include those of Pakistani fertilizer company Fatima Fertiliser, which is known for selling explosive materials used by the Taliban in roadside bombs that have killed or maimed thousands of British and US military personnel in Afghanistan.
Liverpool FC’s kit sponsor SCB also brokered 73 transactions for a Gambian front company owned by key Hezbollah financier Mohammad Ibrahim Bazzi, the documents allege.
image source, Getty Images
Daniel Alter, former general counsel for the New York Department of Financial Services, which SCB first prosecuted for sanctions violations, called the new disclosures “shocking” and “exponentially worse” than the bank’s 2012 admission.
“This shows a terrifying connection not only with commercial entities, but with terrorist organizations, terrorist front companies for organizations like Hamas, Hezbollah, al-Qaeda, the Taliban – things that are a nightmare for regulators – and we didn’t know that: we were never betrayed. And it wasn’t apparent in the data we had,” Mr Alter told the BBC. “It’s a whole different story.
Headquartered in London, SCB serves customers mostly in Africa, the Middle East and Asia.
When Mr Osborne secretly intervened on behalf of the bank, it faced prosecution for money laundering by the US Department of Justice.
On 10 September 2012, Mr Osborne wrote to Ben Bernanke, then chairman of the US Federal Reserve, and US President Barack Obama’s then Treasury Secretary Tim Geithner. He met with them the following month.
Two months later, the bank was fined $300 million but escaped prosecution thanks to a Deferred Prosecution Agreement (DPA), a form of probation for corporations. No individual representative of the bank was prosecuted.
In the same month, Mr Knight turned to US authorities with evidence that the bank’s wrongdoing was far worse than it admitted and continued beyond 2007.
In 2019, SCB agreed to another DPA in relation to transactions between 2007 and 2011 and was fined a further US$1.1 billion.
‘worthless’
Both the FBI and the US Department of Justice declined to comment. Neither Lord Cameron nor Mr Osborne would comment on the record.
SCB said it was “confident the courts will reject these claims”. It said U.S. authorities had previously concluded that the whistleblowers’ claims were “unfounded” and “did not demonstrate any violation of U.S. sanctions.”
But the whistleblowers say US authorities committed “a colossal fraud on this court by falsely denying” that the whistleblowers had provided “previously unknown, incriminating evidence”.