The Treasury is to slap Standard Chartered, the emerging markets lender, with a multimillion-pound fine for failing to prevent sanctions breaches, dealing a further blow to the FTSE-100 bank’s reputation.
Sky News has learnt that the Office of Financial Sanctions Implementation (OFSI) has notified Standard Chartered that it intends to impose a penalty of more than £10m in the coming weeks.
The fine, which is subject to a possible appeal process, will add to the pressure on the company’s board, which has found itself embroiled in a row with leading investors over its chief executive’s pay package.
A City source said this weekend that Standard Chartered, which is the main sponsor of last year’s Premier League runners-up, Liverpool, was expected to appeal against the OFSI fine.
One source close to the bank’s board pointed out that the proposed OFSI fine, while reputationally serious, would be immaterial in financial terms.
The bank has already been hit this year by penalties totalling more than £800m from regulators in London and New York for violating sanctions against Iran.
OFSI, which sits within the Treasury, has a relatively low profile even within Whitehall.
Its track record of financial penalties is limited, with two fines of £5000 and £10,000 respectively having been levied on the private bank Raphael & Sons and Travelex, the foreign exchange provider, earlier this year.
Details of the specific reasons underpinning OFSI’s decision to fine Standard Chartered or the calculation of the £10m-plus penalty, were unclear this weekend.
The agency, which was set up in 2016, provides a quarterly report to parliament on the operation of the UK’s regime for freezing the assets of suspected terrorists.
Its latest annual review is likely to be published in the autumn.
OFSI’s intervention in Standard Chartered’s patchy record at preventing the flow of money to and from sanctioned regimes is only the latest in a litany of legal and regulatory issues to have hit the London-based lender.
In April, the Financial Conduct Authority imposed a £102m fine on Standard Chartered for breaches in its UK wholesale bank correspondent banking business and its branches in the United Arab Emirates, where it is a major player.
The City watchdog said the bank had opened an account with the equivalent of more than £500,000 in a suitcase in the Middle East “with little evidence that the origin of the funds had been investigated”.
It also said that Standard Chartered had neglected to gather information about a customer exporting a commercial product with potential military applications.
The FCA described the bank’s oversight of its financial crime controls as “narrow, slow and reactive”.
The series of breaches identified by the City watchdog were found to have occurred up until the end of 2014.
In the US, the Department of Justice (DoJ) imposed a fine of $480m and sad Standard Chartered had agreed to forfeit a further $240m that had been processes in 9500 transactions “through US financial institutions for the benefit of Iranian entities”.
The penalty was viewed as being especially damaging to the bank’s reputation because of the Trump administration’s increasingly hostile rhetoric towards Iran.
At the same time, the New York County District Attorney’s Office imposed a further fine of more than $292m and extended Standard Chartered’s deferred prosecution agreement with it by an additional two years.
The series of punishments has added to the pressure on Bill Winters, Standard Chartered’s chief executive since 2015.
A highly regarded career banker, Mr Winters has nevertheless struggled to convince the City that he can restore the company’s historic growth trajectory while building the required quality of its compliance function.
Standard Chartered’s shares are down about 6% over the last year, giving the bank a market value of just under £20bn.
During Mr Winters’ tenure, they have fallen sharply, although the headache posed for banks by continued ultra-low interest rates has had a similar impact on many of its peers over a similar period.
Soon after the FCA and DoJ fines were announced, Standard Chartered unveiled a $1bn share buyback aimed at reviving its wilting valuation.
Temasek Holdings, the Singaporean state investment fund that is its largest shareholder, was reported earlier this year to have become frustrated by the pace of Mr Winters’ turnaround.
Tensions with investors erupted again more recently when Mr Winters described shareholders as “immature” for protesting over his pension cash allowance of £474,000 – the biggest of any UK bank chief executive.
His comment in an interview with the Financial Times drew a furious backlash from the City, and Standard Chartered has yet to set out how it plans to draw a line under the row.
Standard Chartered and the Treasury declined to comment on Saturday.