On August 6th, the New York State Department of Financial Services instituted administrative proceedings against Standard Chartered Bank ("SCB") for allegedly scheming with the Government of Iran to hide from regulators approximately $250 billion in improper transactions acquired over a ten-year period. The order instituting proceedings further alleges that SCB reaped hundreds of millions of dollars in fees as a result of its actions and "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." Although the order discusses only SCB's actions relating to Iran, it notes that SCB apparently engaged or attempted to engage in similar conduct with Libya, Myanmar, and Sudan. The order requires SCB to, among other things, demonstrate why its license to operate in the State of New York should not be revoked and demonstrate why its U.S. dollar clearing operations should not be suspended.

The Washington Post questioned whether federal regulators have been doing enough to monitor the banking industry's compliance with financial transaction requirements. Federal Questions. On August 9th, Reuters reported that the state investigation appears to be aimed at books and records violations rather than at the underlying substantive law. Cover-Up. On August 8th, Reuters reported that the New York State regulator's decision to file administrative charges caught U.S. federal regulators by surprise, angering some. Negotiators from the Federal Reserve and Treasury Department had been in discussions with SCB in an effort to settle related charges more quietly. Surprise. Bloomberg discussed why the New York regulator decided to act alone and the fine it may levy. Penalty. The Guardian reported that the U.S. Department of Justice has joined the investigation. Criminal Probe. The Telegraph published SCB's denial of the allegations and the public support the firm is receiving from the Bank of England. Defense. The Washington Post summarized the letter sent by the Treasury Department's Office of Foreign Asset Control to U.K. regulators that explains U.S. restrictions on financial transfers to Iran. Explanation.