What does a bank have to do to lose its banking license?
It’s the obvious question after New York banking regulators proposed revoking the banking license of Standard Chartered PLC’s U.S. subsidiary. According to regulators, money laundering is so routine at this bank that it has standard operating procedures for it. They estimate it has laundered a quarter of a trillion dollars for customers in Iran, going to great lengths to disguise the parties to the transactions in order to mislead regulators and law enforcement authorities. And so yesterday, regulators ordered the bank to explain why it should be allowed to keep operating.
Standard Chartered issued a response that contains the phrase “strongly rejects the position and portrayal” in its headline. In the text of the statement, though, Standard Chartered indirectly acknowledges the gist of the facts in the complaint against it. It did actively conduct business in Iran in spite of U.S. sanctions. It did carry out transactions that didn’t meet legal standards. Yet the bank is “surprised” that this should be the subject of an enforcement action. That is probably the reaction of many others on Wall Street as well. If you are a banker and break the law, aren’t regulators just supposed to order you to stop breaking the law, and then leave you alone? Regulators can’t revoke a bank’s charter just because it has operated outside the law and appears to have lost its moral compass, can they?
Or can they?