Deloitte allegedly provided a bank accused of doing business with the Iranian government with a “watered down” independent report that omitted any mention of the suspicious transactions.
Standard Chartered Bank is under investigation by the New York State Department of Financial Services, which accused the London-based bank of scheming with the Iranian government and hiding from regulators roughly 60,000 secret transactions, totaling at least $250 billion, while the bank reaped hundreds of millions of dollars in fees.
“SCB’s actions left the U.S. financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes, and deprived law enforcement investigators of crucial information used to track all manner of criminal activity,” said an order issued Monday by Benjamin M. Lawsky, superintendent of the department.
The document notes that Deloitte may have aided in covering up the transactions for Standard Chartered Bank. “SCB intentionally withheld material information from New York and federal regulators in its effort to service Iranian clients,” said the document. “SCB carefully planned its deception and was apparently aided by its consultant Deloitte & Touche, LLP, which intentionally omitted critical information in its ‘independent report’ to regulators. This ongoing misconduct was especially egregious because—during a key period between 2004 and 2007—SCB’s New York branch was subject to a formal supervisory action by the Department and the Federal Reserve Bank of New York for other regulatory compliance failures involving the Bank Secrecy Act, anti-money laundering policies and procedures, and OFAC regulations."
In 2004, New York regulators discovered other significant violations by SCB of Bank Secrecy Act and anti-money laundering laws. The bank consented to a formal enforcement action and executed a written agreement with the department and the Federal Reserve Bank of New York requiring it to adopt sound practices and hire an independent consultant to conduct a retrospective review of transactions from July 2002 through October 2004 to identify any suspicious activity.
SCB vowed to regulators that it would comply with the written agreement, the department noted in its order, and to that end, SCB retained Deloitte & Touche to conduct the required independent review and report its findings to the regulators.
“In August and September 2005, D&T unlawfully gave SCB confidential historical transaction review reports that it had prepared for two other major foreign banking clients that were under investigation for OFAC [Office of Foreign Assets Control] violations and money laundering activities,” said the order. “These reports contained detailed and highly confidential information concerning foreign banks involved in illegal U.S. dollar clearing activities. Having improperly gleaned insights into the regulators’ concerns and strategies for investigating U-Turn-related misconduct, SCB asked D&T to delete from its draft ‘independent’ report any reference to certain types of payments that could ultimately reveal SCB’s Iranian U-Turn practices. In an email discussing D&T’s draft, a D&T partner admitted that ‘we agreed’ to SCB’s request because ‘this is too much and too politically sensitive for both SCB and Deloitte. That is why I drafted the watered-down version.’”
Deloitte did not immediately respond to a request for comment. However, the firm told Reuters, “Deloitte Financial Advisory Services performed its role as independent consultant properly and had no knowledge of any alleged misconduct by bank employees. Allegations otherwise are unsupported by the facts.”
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