A British bank that avoided prosecution for money laundering is alleged to have facilitated billions of dollars in transactions for terrorist group funders, according to US court documents.
Standard Chartered, one of the UK’s largest banks, was spared prosecution by the US Department of Justice in 2012 after the intervention of Lord Cameron’s government.
Newly filed documents in a New York court allege that the bank conducted thousands of transactions worth over $100bn from 2008 to 2013, violating sanctions against Iran.
An independent expert has identified $9.6bn in foreign exchange transactions with individuals and entities designated by the US government as funding “terror groups,” including Hezbollah, Hamas, al-Qaeda, and the Taliban.
In response, the bank stated it disputes the whistleblowers’ claims, asserting that their previous allegations had been “thoroughly discredited” by US authorities.
Sanctions breached
Standard Chartered was publicly accused of falsifying transaction data on Swift, an international payment system used by thousands of financial institutions, to move billions of dollars through its New York branch on behalf of sanctioned entities like the Central Bank of Iran.
In September 2012, George Osborne, then Chancellor under Lord Cameron’s government, secretly intervened on the bank’s behalf. Three months later, the US Department of Justice decided not to prosecute the bank.
The foreign exchange transactions identified in the court filings had not yet come to light, and there is no suggestion that Osborne or Cameron were aware of these transactions at the time.
The bank has twice admitted to breaching sanctions against Iran and other countries, first in 2012 and again in 2019, paying fines totaling over $1.7bn. However, it has not admitted to conducting transactions for “terrorist” organizations.
The transactions remained hidden in confidential bank spreadsheets first handed to US authorities in 2012 by two whistleblowers, including a former Standard Chartered executive, Julian Knight. The whistleblowers allege that US government agencies made false statements to a court to have their claim for a whistleblower’s reward dismissed.
US authorities involved in investigating the bank successfully applied to have the case dismissed in 2019. An FBI agent claimed to a court that there was no indication the bank had engaged in improper US dollar transactions after 2007. US authorities argued the whistleblowers’ allegations did not lead to the discovery of any new violations, and the court dismissed the case as meritless.
However, independent analysis by David Scantling, an expert with decades of experience examining illicit bank transactions for the CIA, contradicts that. In a court filing last Friday, he stated that the spreadsheets contain records of more than half a million transactions between 2008 and 2013 that were “cloaked,” meaning they were not immediately visible in the spreadsheets but could be extracted through a simple technique known to analysts in his field.
His declaration says that among the records are numerous transactions by Standard Chartered Bank (SCB) “with or on behalf of Iranian banks, Iranian companies, and Middle Eastern money exchanges that, according to [the US government], finance designated foreign terrorist organizations.”
He asserts that SCB processed transactions for a bank fronting for the Central Bank of Iran after claiming to have ceased its Iranian operations in 2007. This occurred while the bank was borrowing an average of $2bn a day from the Term Auction Facility, an emergency program set up 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 representations to the court in this matter that the [whistleblowers’ evidence] contains no evidence of undisclosed sanctions violations,” the Scantling declaration says.
The transactions include those of a Pakistani fertiliser company, Fatima Fertiliser, known for selling explosive materials that were used by the Taliban in roadside bombs that killed or maimed thousands of UK and US military personnel in Afghanistan.
SCB, the shirt sponsor for Liverpool FC, also facilitated 73 transactions for a Gambian front company owned by a key Hezbollah financier, Mohammad Ibrahim Bazzi, the documents allege.
Daniel Alter, former general counsel at the New York Department of Financial Services, which first pursued SCB for breaching sanctions, called the new disclosures “shocking” and “exponentially worse” than the bank admitted in 2012.
“This shows a frightening connection to not just commercial entities, but terrorist organisations, terrorist front companies for organisations such as Hamas, Hezbollah, al-Qaeda, the Taliban – things that make up a regulator’s nightmare – and we didn’t know that: it was never disclosed to us. And it wasn’t apparent in the data that we had,” Mr Alter told the BBC. “It’s a whole different story”.
Standard Chartered Bank (SCB), headquartered in London, primarily serves customers in Africa, the Middle East, and Asia.
When George Osborne secretly intervened on the bank’s behalf, SCB was facing the risk of criminal prosecution for money laundering by the US Department of Justice.
On 10 September 2012, Osborne wrote to Ben Bernanke, then chair of the US Federal Reserve, and to then US Treasury Secretary Tim Geithner, also meeting with them the following month. Two months later, SCB was fined $300 million but avoided prosecution through a deferred prosecution agreement (DPA), essentially a form of probation for corporations. No individual bank executive was prosecuted.
In the same month, Julian Knight approached US authorities with evidence suggesting that the bank’s misconduct was far worse than admitted and continued beyond 2007.
In 2019, SCB agreed to a further DPA concerning transactions between 2007 and 2011 and was fined an additional $1.1 billion.
‘Meritless’
Both the FBI and US Department of Justice declined to comment. Neither Lord Cameron nor Mr Osborne commented on the record.
SCB said it was “confident the courts will reject these claims“. It said US authorities had previously concluded the whistleblowers’ claims were “meritless” and “did not show any violations of US sanctions”.
But the whistleblowers claim the US authorities have perpetrated “a colossal fraud on this court by falsely denying” that the whistleblowers provided “previously unknown, damning evidence”.