Regulators in Europe and Asia are believed to be investigating Standard Chartered – one of Hong Kong’s three currency issuing institutions – over the role staff may have played in transferring US$1.4 billion of private bank client assets from the English Channel Island of Guernsey to Singapore, before new tax transparency rules were introduced.
The bank conducted an inquiry and notified regulators after employees raised questions early last year about the timing of the transactions and whether the source of customers’ funds had been properly vetted, sources told Bloomberg.
The assets – held in its Guernsey trust unit for mainly Indonesian clients, some of whom had links to the military – were moved in late-2015 before the island – a British dependancy – adopted the Common Reporting Standard (CRS), a global framework for the exchange of tax data, at the start of 2016, they said.
Under the CRS, different jurisdictions’ regulators automatically exchange account information with each other. Over 100 jurisdictions have indicated that they will sign up to the standards, which came into force in Guernsey in 2016, but won’t take effect in Singapore and Hong Kong until 2018.
Last July, Standard Chartered said it was shutting down its Guernsey office and transferring all its trust and fiduciary services to Singapore, citing “shifting client needs.”
The Monetary Authority of Singapore, the country’s central bank, and Guernsey’s Financial Services Commission are now said to be investigating the chain of events.
The UK Financial Conduct Authority, Standard Chartered’s home regulator, is aware of the transfers, but isn’t currently reviewing them, one source close to the matter told Bloomberg.
A spokesman for Standard Chartered declined to comment. Dale Holmes, secretary of the Guernsey regulator who acts as a spokesman, along with the MAS and FCA also declined to comment.
Standard Chartered’s processes and the way the transfers were handled are being examined, but regulators haven’t suggested that bank employees colluded with clients to evade tax, the sources said.
The bank’s chief executive officer Bill Winters has dealt with a near-constant stream of misconduct issues old and new in his two-year tenure, from violating US sanctions on Iran to accusations of bribery in Indonesia.
The bank has made numerous attempts to improve its compliance controls, including forming a board-level financial crime risk committee in 2015 and hiring detectives from Hong Kong Police Force, the FBI, Britain’s Scotland Yard, and the New Zealand intelligence agency for its internal investigations team, Bloomberg reported last year.
The scandals have overshadowed Winters’ efforts to turn around the Asia-focused lender.
Last year, he introduced a tighter code of conduct, saying senior staff had been flouting ethics rules and saw themselves as “above the law.”
It has paid almost US$1 billion in settlements for engaging in deals with Iran and for failing to improve anti-money-laundering systems. If the lender slips up significantly again, it could face further fines or even the loss of its US banking license.
A focus of the bank’s internal investigation was whether it had adequately scrutinised the source of the customers’ funds and performed the appropriate “know your client” due diligence, the sources said.
Employees of the trust in Guernsey and relationship bankers in Singapore flagged the US$1.4 billion of asset transfers, when they were first proposed in 2015, noting a sudden flurry of requests in what was previously a static series of accounts, people familiar with the timeline said. The transfers were approved by Standard Chartered’s financial crime compliance team after a review, they said.
Regulators from Guernsey are believed to have travelled to the UK to interview some of those involved in executing and approving the transfers.
The firm’s probe is also believed to have examined if staff breached its code of conduct, said Bloomberg, when making the transfers, and considered if the timing was related to the impending introduction of the CRS tax rules in Guernsey.