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Standard Chartered Probed On $1.4bn Illegal Cash Transfer

Guernsey’s Financial Services Commission and the Monetary Authority of Singapore (MAS) are investigating Standard Chartered Plc over a transfer of US$1.4 billion of assets from a private banking client which happened in late 2015 before Guernsey had adopted new tax transparency rules.

Current reports suggest that it was Standard Chartered Bank that conducted an internal inquiry and notified regulators of suspected impropriety in the transactions. Employees had raised questions about the timing of the transfers and whether appropriate vetting was carried out with regards to the source of the money.

Based on the Common Reporting Standard (CRS) which multiple countries adopted at the start of 2016 as a framework for exchange of tax data, countries have agreed to automatically share annual reports about accounts of people that are subject to taxes in each of the member nations. The suspicions arose as the transfers took place just before Guernsey adopted the CRS. Employees are reported to have got concerned when they noted a sudden flurry of requests for asset transfers from accounts that were otherwise static.

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Bloomberg reports that the focus of the bank’s internal investigation was whether adequate scrutiny was done of customer funds and appropriate “know your client” due diligence was carried out. Bloomberg quoted anonymous sources as saying that Standard Chartered reported the matter itself to the regulators. The report also noted that financial watchdogs in Europe and Asia are looking into the bank’s processes but that they have not suggested any collusion between bank employees and clients for the purpose of evading tax.

International Investment reports that there were enormous gaps between the stated earnings of some clients and the balances that were being held in their accounts. Clients that had claimed annual income in a few thousands held millions in their accounts. Standard Chartered staff are also said to have flagged these suspect transactions as some of the clients had links to the military and therefore should have been subjected to a higher level of scrutiny.

Standard Chartered Bank’s new CEO Bill Winters has had to face a number of challenges in his short tenure so far which include forex violations, bribery allegations in Indonesia and violation of U.S sanctions on Iran.

The one positive in the $1.4 billion transaction to Guernsey is that Standard Chartered is alleged to have first reported the concern to the regulators which could go in the bank’s favor.

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