This case is routinely described as a second wire-stripping settlement. OFAC’s enforcement information for 9 April 2019 describes something different, and the difference is the reason the case is on this site.
What the notice says
From June 2009 until June 2014, Standard Chartered processed 9,335 transactions totalling $437,553,380 to or through the United States, all involving persons or countries subject to comprehensive OFAC programmes.
OFAC states that the majority of the conduct concerns Iran-related accounts maintained at the bank’s Dubai branches, including accounts held for a number of general trading companies and a petrochemical company. Those branches processed dollar transactions through Standard Chartered’s New York branch and other US institutions on behalf of customers who sent payment instructions while physically located and/or ordinarily resident in Iran.
Why that is a different technique
Stripping falsifies the payment message. This is not that. The message could be entirely accurate: the originating customer really was a trading company in Dubai, with a real account at a real bank in a country under no relevant restriction.
What made the transactions prohibited was who was actually operating the account and from where. The Dubai entities are the interface; the instruction came from Iran. That is the third-country account and the front company working together, and no amount of scrutiny of the payment message would have revealed it.
The detail that “general trading companies” held these accounts is worth noticing. That is the declared line of business that recurs throughout the front company literature, precisely because it explains almost any payment to almost any counterparty.
Two settlements, one day
Treasury’s penalties list records $657,040,033 for Standard Chartered on 9 April 2019. That figure is two matters added together, and they are worth separating because their determinations are opposites.
The global settlement component was $639,023,750, against a base penalty of $2,715,100,479, for the Dubai conduct described above. OFAC determined it was egregious and not voluntarily self-disclosed. The obligation was deemed satisfied up to an equal amount by payments to other US federal agencies for the same conduct, and the resolution involved OFAC, the Federal Reserve, the Federal Reserve Bank of New York, two arms of the Department of Justice, the New York County District Attorney, the New York State Department of Financial Services and the UK’s Financial Conduct Authority.
Separately, the bank agreed to remit $18,016,283 for apparent violations of the Zimbabwe Sanctions Regulations. OFAC determined that conduct was voluntarily self-disclosed and non- egregious.
The Zimbabwe half is a 50 percent rule case
It is the smaller number and the more instructive one.
OFAC records that all of the transactions giving rise to the Zimbabwe apparent violations involved persons on the SDN List “or parties that were owned 50 percent or more, directly or indirectly, by persons on the SDN List at the time the transactions occurred.”
Those parties held accounts with the bank’s Zimbabwe affiliate, and their card and funds- transfer activity produced net settlement transfers processed through New York — 1,795 transactions totalling $76,795,414, against a base penalty of $26,690,789.
This is the 50 percent rule doing exactly what it is designed to do. The account holders were not themselves listed. Screening their names against the SDN List would have returned nothing. They were blocked because of who owned them, which is a question about corporate ownership rather than about names, and it is the reason ownership analysis is a necessary complement to screening rather than an optional refinement.
The contrast in determinations is also worth registering: the same institution, on the same day, self-disclosed one matter and did not disclose the other, and the difference is visible in the ratio of settlement to base penalty in each.
The repetition
Treasury’s civil penalties list records a $132,000,000 settlement with Standard Chartered on 10 December 2012 and this one in 2019. The 2019 conduct runs from June 2009 to June 2014 — overlapping the earlier resolution and continuing past it.
That chronology is ordinary in this field rather than exceptional. A resolution is reached on the conduct then known, the investigation continues through the same archive, and further conduct surfaces afterwards. Two entries for one institution are usually one course of dealing examined twice.