Enforcement Directorate, the Indian anti-money laundering agency, has slapped with a 1 billion rupees ($13.6 million) fine for breaking the country’s foreign exchange rules in a 2007 local bank takeover deal.
The orders for the fine was passed in August, making it one of the largest fines imposed by any agency on an oversees lender. It is, however, not clear if the bank will pay the fine or appeal against the order.
As reported by Bloomberg on Tuesday, the hefty was imposed after a probe continuing for eight years involving the purchase of a stake in Tamilnad Mercantile Bank Ltd. in 2007.
The agency was investigating the transfer of 46,862 shares of the local bank to overseas investors without seeking the permission of the Indian central bank, which is mandatory for such transactions. The foreign investors include GHI Ltd., Swiss Re Investors, FI Investments, and Cuna Group.
The order also detailed that a portion of the shares was then transferred to Standard Chartered affiliate Sub-Continental Equities Ltd in 2008. The British lender did not seek permission from the monetary regulator for that transaction either.
Furthermore, Standard Chartered is also blamed for providing custodian services in the deal.
Violation of local rules
The agency found that the international bank has violated the country’s foreign exchange management act that monitors offshore financial transactions.
The agency also fined Tamilnad Mercantile Bank with around 170 million rupees (around $2.3 million) for similar charges.
“Senior officials at Standard Chartered saw an investment in TMB shares as an opportunity that might ripen into an eventually larger ownership for the bank,” Sushil Kumar, a special director at the Enforcement Directorate, stated in the order.
“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.”