For the second time in two years, Benjamin Lawsky, the Superintendent of the New York State Department of Financial Services (DFS), has settled another matter with Standard Chartered Bank for alleged “anti-money laundering compliance problems.” The new settlement provides that Standard Chartered will pay a $300 million penalty to DFS and contains numerous other provisions intended to rectify oversights that the DFS alleged it found in Standard Chartered’s anti-money laundering (AML) procedures.

A second action in two years is to our knowledge unprecedented. This should serve as a continuing reminder that both DFS and the New York Attorney General are actively investigating and examining the activities of financial institutions doing business in New York, and should encourage companies in the financial sector to review their AML practices and procedures to ensure that they are sufficiently robust to survive such scrutiny.

In addition to paying the $300 million penalty, Standard Chartered has agreed under the latest DFS settlement to:

  • Obtain DFS approval before opening new U.S. dollar demand accounts for customers who are not already customers of Standard Chartered
  • Suspend U.S. dollar-clearing activity for certain of its Hong Kong branch’s high-risk retail clients until the bank’s detection scenarios meet the independent monitor’s approval
  • Discontinue some business relationships in the United Arab Emirates

In 2012, the British bank entered into a $340 million settlement with DFS to resolve allegations claiming the bank violated U.S. sanctions by laundering $250 billion for Iranian clients in its New York branch. Shortly after that, Standard Chartered settled with other regulators for an additional $300 million. As required by the 2012 settlement, Standard Chartered engaged an independent monitor to examine and evaluate its Bank Secrecy Act (BSA)/AML operations for two years. This independent monitor discovered in the course of her review that the bank’s computer systems failed to flag wire transfers flowing from areas of the world considered vulnerable to money-laundering, leading to this new settlement.

The new settlement will require Standard Chartered to implement an effective transaction monitoring system, to implement a remediation action plan to correct past wrongs, and to continue employing the independent monitor (at considerable cost) for another two years.

It is worth noting that, as he did the first time, Mr. Lawsky acted aggressively and, it appears, without any coordination with federal authorities. It remains to be seen whether Standard Chartered will face any action by the Federal Reserve, the Financial Crimes Enforcement Network (FinCEN), or other federal agencies.

This action reflects continued scrutiny by the DFS on financial institutions that do business in New York. It also reflects the reality that the DFS will continue to look at the conduct of financial institutions after they have resolved matters, and will not hesitate to pursue further action if DFS believes that the institution is violating the law.

Ballard Spahr's Bank Regulation and Supervision Group and Consumer Financial Services Group regularly counsel bank and nonbank clients on AML compliance and represent them in connection with enforcement actions. In addition, the Bank Regulation and Supervision Group, Consumer Financial Services Group, and White Collar/Investigations Group include experienced lawyers who regularly assist clients in corporate investigations, responses to subpoenas, and civil investigative demands.

Our attorneys, including the attorneys who joined us from the New York City litigation firm Stillman & Friedman, P.C., to form Ballard Spahr Stillman & Friedman LLP, have substantial experience in handling litigation and enforcement actions involving the DFS and the New York Attorney General.

For more information, please contact CFS Practice Leader Alan S. Kaplinsky at 215.864.8544 or, Beth Moskow-Schnoll at 302.252.4447 or, Marjorie J. Peerce at 212.223.0200 x8039 or, Keith R. Fisher at 202.661.2284 or, or Joseph J. Schuster at 215.864.8614 or

Copyright © 2014 by Ballard Spahr LLP.
(No claim to original U.S. government material.)

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.

This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.