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Stanchart may pay US$300m over deal violation

[NEW YORK] Standard Chartered is close to agreeing to pay as much as US$300 million to resolve claims by New York's banking regulator that it did not flag suspicious transactions after promising to do so in a 2012 accord, a person with knowledge of the matter said.

A settlement between the London-based bank and Benjamin Lawsky, superintendent of New York's Department of Financial Services, could come as soon as this week, the person said, asking not to be identified because the talks are confidential.

Standard Chartered said this month that it expects to be fined by the New York regulator and to face "remedial actions" over lapses in its anti money-laundering controls. The bank said the problem was spotted by the independent monitor Mr Lawsky installed as part of a US$667 million accord the London-based firm reached with US authorities over claims it violated US sanctions laws in relation to Iran.

"It's a shade worse than was previously rumoured," said Ian Gordon, an analyst at Investec in London with a buy rating on the stock. 

"In the greater scheme of things, if it's US$100 million or US$300 million, or somewhere in between, it's not overly material."

The bank's shares are down 10 per cent this year, the second-worst performance among Britain's five biggest lenders after Barclays.

Mr Lawsky's office secured US$340 million in August 2012 in a deal reached the day before the bank was due to defend itself to the regulator. The rest went to authorities including the Federal Reserve, the Manhattan District Attorney and the US Department of Justice in a deal concluded in December of that year.

Earlier this year, the monitor, Ellen Zimiles of Navigant Consulting, identified lapses in the bank's compliance related to a software program that was not flagging transactions from risky parts of the world for further review.

Ms Zimiles's contract is expected to be renewed for two years as part of the new settlement, the person said. Standard Chartered said in an Aug 6 statement that it anticipated the monitor's term to be extended as part of any deal.

Caitlin Ferrell, a spokeswoman for Mr Lawsky's office, and Standard Chartered's Julie Gibson declined to comment.

Details about the settlement amount and the timing were reported by the Financial Times.

In the past few months, American regulators and prosecutors have forced some of the world's largest banks to pay massive fines for everything from breaching US sanctions to alleged mortgage abuse and illegal tax schemes.

Now, the question is what the US is going to do with all the cash. In some places - particularly New York state - that is leading to ugly wrangling over how to spend it.

A feud developed between New York attorney general Eric Schneiderman and the state's Governor, Andrew Cuomo, over last year's US$13 billion mortgage-related settlement against JPMorgan.

Some of the US$18.5 billion in penalties US authorities have levied on banks since May was already earmarked in settlement papers for specific purposes, such as principal forgiveness on struggling homeowners' mortgages. - Bloomberg