NEW YORK, Aug 7 (Reuters Breakingviews) - Standard Chartered
can't avoid the long arm of the Lawsky - Benjamin Lawsky, that
is. The brash New York state financial services regulator is
threatening to yank the British bank's license over claims it
hid some $250 billion in transactions for Iranian clients. It's
an aggressive move that grabs the spotlight from federal
enforcers like the Department of Justice. But if StanChart wants
to do business on Wall Street, it has to play by local rules.
The U.S. government has, of course, dinged plenty of foreign
banks before. The Federal Reserve effectively booted Japan's
Daiwa from the country, the Senate slammed HSBC over
money laundering and the DoJ and the Commodity Futures Trading
Commission extracted hefty fines from Barclays for
manipulating Libor.
Yet state regulators almost never take the lead against
global lenders. In this sense, Lawsky has broken the mold. A
former federal prosecutor and henchman for both the senior
senator and governor of New York, he pounced immediately as head
of the state's new financial services agency. In less than a
year, he has brought dozens of insurers and banks to heel over
unpaid death benefits, abusive foreclosures and other
high-profile issues.
His hook for pursuing StanChart is the prosaic power to
license foreign banks' Wall Street branches. That's enough to
ensure lenders report fraud, keep accurate books, cooperate with
examiners and operate in a generally sound manner. The bank,
Lawsky claims, violated all those duties by covering up
transactions that breached U.S. financial sanctions against
Iran.
StanChart says the Fed, the Office of Foreign Assets Control
and other U.S. agencies have been reviewing its activities.
Whether they approved of Lawsky's move is still unclear. The
financial services department says it gave all parties fair
notice, though it also stresses that it's acting solo.
That kind of bold behavior can raise eyebrows, if not
hackles, in political circles. It can also propel ambitious
officials into the public eye, something Lawsky, not to mention
his boss, Governor Andrew Cuomo, have surely taken into account.
In this context, the young regulator's actions resemble
those of another aggressive New York watchdog. Eliot Spitzer did
much to shake up Wall Street as New York attorney general.
Lawsky could do worse than follow in Spitzer's footsteps, well,
at least some of them.
CONTEXT NEWS
- Benjamin Lawsky, the superintendent of New York's
Department of Financial Services, filed on Aug. 6 an order
against Standard Chartered to answer allegations that the UK
bank hid some $250 billion in transactions for Iranian clients.
StanChart has denied the allegations.
- A close ally of New York Governor Andrew Cuomo, Lawsky was
named the department's first head in October 2011 and has since
moved aggressively to subpoena banks, discipline lenders over
abusive foreclosures and force insurers to pay more than $100
million in withheld death benefits.
- The department combines the state's former banking and
insurance departments and is responsible for regulating banks
licensed to do business in New York.
(Reporting by Reynolds Holding. The author is a Reuters
Breakingviews columnist. The opinions expressed are his own.)
Follow us on Twitter @ReutersLegal | Like us on Facebook