New York Grabs the Regulatory Spotlight: The Standard Chartered Saga


By: Luis Calvo

On August 15, Standard Chartered Bank paid an historic $340 million fine to New York State’s Department of Financial Services to settle claims that the bank helped Iran (and other U.S.-sanctioned nations) funnel money through the U.S financial system.  Most in the financial community were shocked that Benjamin Lawsky, a New York state regulator, jumped the gun, acting before and independent of federal regulators. After this daring move by New York regulators, will banks consider moving out of state? Probably not.

Many segments of the financial industry have tried to move out of New York, or at least move portions of their business out of state. In 1994, UBS boldly moved its North American operations out of New York to Connecticut – and regretted it fifteen years later. Bank of America, with its headquarters in Charlotte, North Carolina couldn’t fully leave New York.  In 2009 it completed the Bank of America Tower in midtown Manhattan. People may complain, but New York is New York.

New York has always been a noisy regulator. Way back in 1895, New York sprung into regulatory action by instituting sanitary conditions in bakeries. (New York’s laudable goal was ultimately struck down by the Supreme Court in Lochner v. New York). More recently, in 2007, New York enacted an airplane passenger bill of rights, five years before the federal government did the same. Just last year, New York’s Attorney General led a coalition of state attorneys general investigating mortgage fraud. Now, New York even wants to take away your soda and baby formula!

So, is all the ruckus about Mr. Lawsky jumping the regulatory gun just New York being New York? Not here. The Standard Chartered Bank banking scandal does not involve a scheme to defraud consumers or investors. It is not about health and safety. It is about enforcing federal sanctions against Iran and others. These sanctions are part of the foreign policy tools of the U.S. government. Since the 1979 Iranian Revolution, Iran has been an enemy of the U.S. and the federal government imposed monetary sanctions as a punishment. There is even a specially designated federal regulator (Office of Foreign Assets Control) that enforces these economic sanctions against countries and regimes that pose threats to the national security, foreign policy and economy of the United States.

New York piggybacked onto the federal government’s economic sanctions against Iran and implemented similar state legislation in furtherance of the federal government’s foreign policy goals. Federal regulators should enforce foreign policy and national security first. In the future a little coordination could go a long way.

Foreign policy and national security are extremely unpredictable. Earlier this year, the U.S. and Myanmar decided to kiss and make up. Today a former enemy of the U.S. is open to U.S. business. Imagine tomorrow Iran suddenly renounced nuclear weapons and paid all pending money damages pending since 1979. How would that make New York banking authorities feel about pulling the regulatory trigger?


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Fordham Journal of Corporate & Financial Law