Standard Chartered, the UK-listed bank which earns the bulk
of its revenues in Asia, is reportedly ready to pay a fine to settle charges of
breaking US sanctions on Iran but is holding out until US regulators agree to
retract the emotive language used in their order, according to the Daily
Telegraph newspaper.

The bank concedes it is prepared to pay a "large
fine" to Benjamin Lawsky, the combative Superintendent of New York State
Department of Financial Services (DFS) and other US authorities. But the bank
has said it will not yield until the regulator has "toned down" the
presentation of its charges.

Lawsky has summoned Standard Chartered to a hearing on
Wednesday to "demonstrate why [its] licence to operate in the state of New York should not be
revoked". He claimed "flagrantly deception actions" by the bank
left the US
"vulnerable to terrorists, weapons dealers, drug kingpins and corrupt
regimes", the report said.

In a statement last week, StanChart said it “strongly
rejects the position or the portrayal of facts as set out in the order issued
by the DFS”.

The newspaper reported that an identified source “close to
the bank” said: "Standard Chartered is resolved to the fact that it is
facing a big fine. But the bank feels it cannot agree to the charges as
presented by Mr Lawsky. Neither side wants this week's hearing to go ahead but
at the moment they are a gulf apart on the charges."

The bank faces an estimated fine of around $1 billion and
potential costs to the business of as much as $5 billion, according to analysts, the
reported added.

In its 8 August statement on the matter, StanChart said: “The
Group had previously reported that it is conducting a review of its historical
compliance and is discussing that review with US agencies, including the DFS,
the Department of Justice, the Office of Foreign Assets Control, the Federal
Reserve Group of New York
and the District Attorney of New York.”

“In January 2010, the Group voluntarily approached all
relevant US
agencies, including the DFS, and informed them that we had initiated a review
of historical US dollar transactions and their compliance with US
sanctions.  This review focused primarily
on transactions relating to Iran
in the period 2001-2007, and in particular, their compliance with the U-turn
framework established by the US
authorities to enable ongoing US dollar trade with Iran by other countries,” it
continued.

“This review was conducted by external counsel and external
consultants.  The Group waived its
attorney-client and work product privileges to ensure that all the US agencies
would receive all relevant information. 
The Group also gave regular updates and presentations to the DFS and the
other agencies on the results of the Group’s investigation. The materials
included several thousands of pages of documents and interview notes, plus
analysis of approximately 150 million payment messages,” it said..

“The Group does not believe the order issued by the DFS
presents a full and accurate picture of the facts.  The analysis, that the Group shared with all
the US
agencies, demonstrates that throughout the period the Group acted to comply,
and overwhelmingly did comply, with US sanctions and the regulations relating
to U-turn payments.  As we have disclosed
to the authorities, well over 99.9 per cent of the transactions relating to Iran complied
with the U-turn regulations.  The total
value of transactions which did not follow the U-turn was under $14 million,”
it continued.

“The Group believes that the interpretation reflected in the
DFS’ order, of the U-Turn exemption — a federal regulation administered and
enforced by federal authorities — is incorrect as a matter of law.  The Group’s review of its Iranian payments
also did not identify a single payment on behalf of any party that was
designated at the time by the US Government as a terrorist entity or
organization,” it said.

“Standard Chartered ceased all new business with Iranian
customers in any currency over five years ago. 
The Group has made presentations to the DFS and other US agencies
concerning the strength of its global sanctions compliance programme during the
period under review and through to the present day. The Group is engaged in
ongoing discussions with the relevant US agencies. Resolution of such
matters normally proceeds through a co-ordinated approach by such
agencies.  The Group was therefore
surprised to receive the order from the DFS, given that discussions with the
agencies were ongoing.  We intend to
discuss these matters with the DFS and to contest their position,” it said.