Standard Chartered sets aside $900m to cover penalties related to US probe, FCA decision, FX trading issues

Maria Nikolova

Standard Chartered’s Q4 2018 results will include a $900 million provision for potential penalties relating to US investigation and FCA decision, and for previously disclosed investigations relating to FX trading issues.

Standard Chartered PLC (LON:STAN) has earlier today published a release related to a provision in respect of legacy financial crime control and FX trading issues.

The company says it continues its discussions relating to the potential resolution of the previously disclosed investigation by the US authorities relating to historical violations of US sanctions laws and regulations.

Also, Standard Chartered has received a decision notice from the UK Financial Conduct Authority’s Regulatory Decisions Committee (RDC) relating to the previously disclosed investigation by the Financial Conduct Authority concerning the group’s historical financial crime controls. The company is considering its options in relation to this decision notice. The decision notice imposes a penalty of £102,163,200 (net of a 30% early settlement discount) on the group.

Standard Chartered’s 2018 fourth quarter results will include a provision totalling $900 million for potential penalties relating to the US investigation and FCA decision, and for previously disclosed investigations relating to FX trading issues, including the January 2019 settlement. This provision reflects management’s current view of the appropriate level of provision. Resolution of the US investigation and of the FCA process might ultimately result in a different level of penalties.

Standard Chartered will be releasing its 2018 full year results on February 26, 2019.

Let’s recall that, in January 2019, Standard Chartered Bank was fined $40 million by the New York Department of Financial Services (DFS) over attempted rigging of Forex markets.

Under the consent order with DFS, Standard Chartered admitted that it failed to implement effective controls over its FX business, which is conducted at its London headquarters and in other global financial centers, including at its New York branch.

DFS’s investigation of Standard Chartered found that traders used chatrooms, e-mails, phone calls and personal meetings to attempt to rig transactions. The illegal activities uncovered range from coordination of trading and spreads among traders to attempts to manipulate trading benchmarks, and trading to move prices in certain markets. The misconduct occurred among salespeople and desk traders using “voice” trading through telephone and electronic communications to buy and sell currencies at Standard Chartered trading centers in such cities as New York and London.

Between 2007 and 2013, traders based in New York and elsewhere joined traders at other locations in a chat room called “Old Gits.” The chat room was used by traders to coordinate trading, share confidential information and otherwise affect FX prices. One trader described the chat room to a new member as “a den of thieves.” Membership in the chat room was controlled by its members who voted on whether new members were trustworthy enough to join.

DFS’s investigation concluded that traders repeatedly ignored guidance from regulators, as well as guidance from the bank itself, that was designed to protect client confidentiality and to avoid situations involving trading on nonpublic information.

DFS also determined that Standard Chartered’s management failed to effectively supervise the bank’s FX business and ensure compliance with rules, regulations and laws. The bank was slow to identify risks and develop policies and processes to govern the business and ensure compliance. The bank had few policies or training programs to guide staff about the line between proper and improper behavior.

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