StanChart Couldn’t Tell Regulator How Some Rich Clients Got Rich
17 Sep 2019

Standard Chartered Plc, fined billions of dollars since 2012 for regulatory violations, has discovered that it cannot explain how some of its wealthiest clients acquired their fortunes and is reviewing thousands of customer accounts at its private bank.

A Dubai regulatory review two years ago, which hasn’t previously been reported, found that the private bank didn’t have documentation to show the sources of some clients’ wealth and in some cases lacked even basic data such as current addresses and phone numbers, according to people familiar with the situation. Similar failings have been identified at major hubs including Singapore, Hong Kong and London, the people said.

This isn’t the first failure of the bank’s anti-money-laundering efforts. In April, Britain’s financial watchdog fined the lender 102 million pounds ($127 million) for “serious and sustained shortcomings” in its client due diligence and monitoring, including in the United Arab Emirates between 2009 and 2014. That was part of a $1.1 billion settlement with U.S. and U.K. regulators that also took Standard Chartered to task over its handling of transactions that violated sanctions against Iran and other countries.

“Standard Chartered’s private bank has made tremendous strides over the past few years, in terms of its business performance and equally in setting industry-leading standards for client due diligence,” the company said in an emailed statement.

Chief Executive Officer Bill Winters has had to address repeated regulatory missteps at the London-based bank, which gets more than 80% of its profit from Asia. When he took over in 2015, he pledged a root-and-branch review of the firm’s compliance protocols to bring to an end the run of fines the bank had incurred. In 2017, Chief Information Officer Michael Gorriz said the bank was nearly “over the hump” on costly compliance upgrades required to cope with stricter regulations.

But the fines keep coming. Last year, two units of the bank were fined about $4.7 million by authorities in Singapore for anti-money-laundering failings over the transfer of client assets from Guernsey to a branch in the Asian city-state.

Standard Chartered’s private banking clients include so-called politically exposed persons — individuals with prominent political or public-sector functions — such as Middle Eastern royals, and African and Asian politicians. One client was a member of the Saudi royal family arrested in the kingdom’s anti-corruption drive in 2017, one of the people said.

The private bank has some $65 billion of assets and accounted for about 4% of the operating income of the firm in the first half. There is no evidence the bank was involved in wrongdoing.

Dubai Review

Following the 2017 review, the Dubai Financial Services Authority ordered the bank to bring in external consultants to act as an independent check on the clean-up, two of the people said. The bank hired Deloitte LLC and two years later is hoping to wrap up the process, which involved the remediation of an unidentified number of client accounts. Senior managers, including Didier von Daeniken, global head of the private bank, were scheduled to meet with Dubai regulators this month, the people said.

By Harry Wilson, Gavin Finch and Ambereen Choudhury, Bloomberg, 16 September 2019

Read more at Bloomberg

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2 Responses to “StanChart Couldn’t Tell Regulator How Some Rich Clients Got Rich”
Donnell Crippen

Donnell Crippen September 16, 2019

Good example to show the BU’s why documentation is necessary.

Shawn Reid

Shawn Reid September 17, 2019

“Standard Chartered’s private bank has made tremendous strides … in setting industry-leading standards for client due diligence,”
How? Having to hire Deloitte due to internal failures?
“Michael Gorriz said the bank was nearly “over the hump” ”
Nearly ‘over the hump’? What hump? Hire people who will actually do their KYC jobs and problems would immediately stop. Either do it correctly and admit they failed and fire everyone connected to the lack of information, or don’t. There is no ‘hump’, there is failure to do things correctly, that’s it. Hiring external consultants sounds like it was a no-brainer, as long as Deloitte misses nothing.

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