Standard Chartered probes fresh allegations

BY Matt Atkins

In response to fresh US allegations over money laundering, the UK bank Standard Chartered will soon begin trawling its extensive data banks for signs of questionable activity, in an effort to avoid additional penalties. Standard Chartered clears approximately two million US dollar transactions each month. The process of sifting through the data will therefore prove a mammoth task.

The UK bank came under scrutiny in 2012, when flaws in its anti-money laundering program were uncovered by a monitor imposed by the New York Department of Financial Services (DFS). The DFS and federal authorities took separate actions against Standard Chartered at the time fining the bank a total of $667m for violating US sanctions by hiding transactions linked to Iran.

Standard Chartered is again under scrutiny from the DFS, the bank disclosed in an earnings announcement last week. A penalty of more than $100m and an extension of the monitorship is possible.

The bank's issues stem from a  problematic transaction-monitoring software system installed in the 2000s. The system is intended to flag suspect transactions, however the so-called 'detection scenarios' that tell the system what activity to flag for human review have not been properly calibrated, according to a Reuters source. Most of the scenarios have now been corrected, said the source, and efforts are underway to fix the others before the bank moves to a new system early in 2015.

The news comes in the same week that a senior executive at Standard Chartered slammed regulators for treating banks and their employees unfairly. "Banks have been asked to play the role of policing anti-money laundering … [but when] we have a lapse we don't get treated like a policeman, we are treated like a criminal," said Jaspal Bindra, who runs Standard Chartered's business in Asia.

The bank said the remarks by Mr Bindra reflected his personal views. Standard Bank's CEO, Peter Sands, said when he was presenting the bank's results, that he respected the views of regulators.

News: Standard Chartered to scour records for money laundering, with penalty at stake

Icahn faces insider trading claims

BY Matt Atkins

Renowned activist investor Carl Icahn has come under investigation for insider trading along with two others. According to reports, the investigation began three years ago and is the latest to emerge from an ongoing crackdown on insider trading by US authorities.

The investigation reportedly centres on suspicious trades in consumer products company Clorox Co by golfer Phil Mickelson and high-profile sports better William Walters. The trades came shortly before Mr Icahn made a bid to take over the company in 2011. Mr Icahn had accumulated a 9.1 percent stake in Clorox in February 2011. In July, he made an offer which valued the company at above $10bn and did wonders for its stock price.

Federal prosecutors in Manhattan are handling the inquiry in conjunction with the FBI and the SEC. The investigation appears to be looking at whether Icahn leaked details of his failed takeover bid to Mr Walters – who Mr Icahn knows – which were subsequently passed on to Mr Mickelson.

Investigators are also looking into trades made by Mr Mickelson and Mr Walters in relation to Dean Foods Co, just before the company announced quarterly results in 2012. These trades appear unconnected to Mr Icahn.

Even supposing Mr Icahn had leaked information about his plans regarding Clorox, there is confusion to whether he would have violated the law. Insider trading regulations prohibit trading based on material, non-public information obtained from someone who breached a fiduciary or confidentiality duty by disclosing it. Since he was not a board member at Clorox, Mr Icahn owed no duty to its shareholders. It is possible that Mr Icahn owed a confidentiality duty to his own investors, though this legal argument may be a stretch, given he owned more that 90 percent of Icahn Enterprises at the time.

Mr Icahn denies all allegations against him. He told Reuters that he was unaware of any investigation and said that his firm always followed the law. He acknowledged a business relationship with Walters but said that he did not know Mickelson personally. "I am very proud of my 50-year unblemished record and have never given out insider information," he said.

News: Icahn, Mickelson are investigated in US insider trading probe

SFO outlines changes to UK Bribery Act

The director of the Serious Fraud Office (SFO), David Green QC, has proposed a number of changes to the UK Bribery Act, which, if enacted, could make it easier for the SFO to prosecute corporations under the Act. Furthermore, the Home Office has is considering financially incentivising whistleblowers in cases of fraud, bribery and corruption. If this is implemented it will represent a significant development in the discovery and enforcement of fraud, bribery and corruption offences in the UK.

FW spoke to Satnam Tumani, a partner at Kirkland & Ellis International, Siobhain Egan, a director at Lewis Nedas Law, and Sam Eastwood, a partner at Norton Rose Fulbright, about the proposed changes.

TalkingPoint: Proposed changes to the UK Bribery Act

SFO turns screw on Barclays

BY Matt Atkins

The UK's Serious Fraud Office (SFO) has ramped up its probe into Barclays's dealings in the Middle East, according to the Financial Times. Former chief executives Bob Diamond and John Varley are due to be questioned under caution by the SFO, along with other senior executives, about alleged corruption in the bank's arrangements in Qatar.

Advisory fees

The SFO is hoping to impose a £50m fine on the bank for failing to disclose £322m in 'advisory fees' paid to Qatari investors, a charge which Barclays contests.

Barclays received Qatari investments worth £4.6bn in two emergency fundraisings in June 2008 and October later that year. The capital raisings, which came to £11.8bn in total and relied heavily on Middle East money, saved Barclays from part-nationalisation in the wake of the financial crisis. The 'advisory services' agreement with Qatar was disclosed in the June capital raising, but not in the October one, contests the SFO. The fees were not mentioned at all.

Barclays disputes the fine on the grounds that the advisory fees did not have to be disclosed under the FCA rulebook. The FCA takes issue with this argument, claiming the payments do not count as advisory fees.

Reasonable suspicion

That the current round of questioning comes under caution suggests the SFO believes it has reasonable grounds to suspect the interviewees have committed an offence. Such interviews, however, do not require arrest and can be scheduled by appointment, as has been the procedure in this case. No charging decision will be reached until the interviews have been conducted.

As the alleged offence dates back to 2008, the ultimate risk for Barclays is a corporate prosecution under the UK’s old corruption laws, since overhauled by the 2011 Bribery Act. Under these laws, the SFO must prove that a so-called directing mind of a company knew of and ordered bribes.

Just last week, Barclays launched a major restructuring plan aimed at boosting sluggish profitability. This news could hardly have come at a more inconvenient time and will surely prove an unwanted reminder of the issues hanging over the bank.

News: UK fraud office steps up probe into Barclays’ dealings with Qatar