India’s regulator fined Standard Chartered one billion rupees over violation of foreign exchange rules during a takeover of a local bank in 2007. India’s anti-money laundering agency slapped one of the country’s largest fines on a foreign bank in history following an 8-year probe that found it in violation of the foreign exchange management act which monitors offshore financial transactions.
According to a report citing an order from India’s enforcement agency, Standard Chartered – the country’s largest foreign bank by branches – acted as a dealmaker and custodian for the transferal of Tamilnad Mercantile Bank (TMB) shares to a group of overseas investors 13 years ago without seeking permission from the local central bank.
Senior officials at Standard Chartered saw an investment in TMB shares as an opportunity that might ripen into eventually larger ownership for the bank,» Sushil Kumar, the enforcement agency’s special director, said in the order.
46,862 shares were transferred to foreign investors including GHI, Swiss Re Investors, FI Investments, Cuna Group and Sub-Continental Equities, an affiliate of Standard Chartered in April 2008. The transfers were made through escrow accounts with Standard Chartered, which acted as both a transaction agent and a lender to one of the investors on the deal.
Standard Chartered through its affiliate Subcontinental was a proposed and eventually an actual investor in TMB shares to be purchased through the escrow agreement arrangements, Kumar added.
Separately, TMB was fined almost 170 million rupees ($2.3 million) for similar charges.