StanChart to monitor some UAE clients for money laundering

Standard Chartered is required to “do enhanced monitoring of certain small and medium sized enterprise clients in the United Arab Emirates,” the bank said in a media statement today.

Following on from its disclosure of August 6, 2014, Standard Chartered announced today that it has reached a final settlement with the New York State Department of Financial Services (DFS) regarding deficiencies in the anti-money laundering transaction surveillance system at its New York branch.

The system, which is separate from the sanctions screening process, is one part of the group’s overall financial crime controls and is designed to alert the New York branch to unusual transaction patterns that require further investigation on a post-transaction basis, it said.

This settlement includes a civil monetary penalty of $300 million (Dh1.1b); enhancements to the transaction surveillance system at the New York branch, a two-year extension of the term of the DFS-appointed independent compliance monitor and a set of temporary remediation measures, including enhanced monitoring of certain UAE clients.

“The UAE remains one of Standard Chartered’s leading franchises globally and the move does not reflect a decreased focus on the country,” it added. “Rather, it will allow the bank to reposition itself for further growth by focusing its efforts on corporate and institutional, commercial, private banking, retail and Islamic banking [sectors],” it added.

 “In any event, the group is seeking to exit this business as part of its broader efforts to sharpen its strategic focus, withdrawing from or re-aligning non-strategic businesses, including those where increased regulatory costs and risks undermine their economic viability,” it noted in the statement.

“The group is making efforts to complete the exit within the timelines set out in the order. If the exit is not achieved within this period, further restrictions will be required, unless an extension is granted by the DFS,” it said.

Among the other measures that the bank is required to take:

* The group’s New York branch will not, without prior approval of the DFS in consultation with the monitor, open a USD demand deposit account for any client that does not already have such an account with the Group’s New York branch

* Within 30 days, requirements for inclusion of identifying information for originators and beneficiaries of some affiliate and third-party payment messages cleared through the New York branch

* After 45 days, a restriction on USD clearing services for certain Hong Kong retail business clients

The bank said that these remediation measures will remain in place until the transaction surveillance system’s detection scenarios are operating to a standard approved by the monitor.

The statement said the bank “accepts responsibility for and regrets the deficiencies in the anti-money laundering transaction surveillance system at its New York branch” and added that it has “already begun extensive remediation efforts and is committed to completing these with utmost urgency.”

The statement added that “the group is committed to enhancing its effectiveness in the fight against financial crime, and in this context, has committed substantial resources to a multi-year Financial Crime Risk Mitigation Programme.”

In addition, it said that “Standard Chartered UAE attaches significant importance to Anti Money Laundering compliance and will be working closely with the Group, SCB NY and our regulators globally to improve the Group’s AML compliance programme.”

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