Project Gazelle was a banker's dream. It was quiet, discreet, and made staggering piles of money catering to clients no one else would touch. The fact that it was also illegal didn't seem to matter much. Bankers at Standard Chartered felt confident no one would notice what they were doing. And even if somebody did, history said the punishment would be a delicate slap on the wrist.
The bank was a stodgy old colonial holdover with a massive headquarters in London. It did a lot of business in Asia, clearing billions each year in profit. Sometime around 2001, the higher-ups spotted yet another place to make a buck: Iran.
The Iranian government (as well as a few private corporations) wanted to get its money out of government-run banks and into England and the Middle East. Standard was happy to help with a series of wire transfers that snaked the funds through multiple countries and, ultimately, safely abroad.
Willie Davis
Willie Davis
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The scheme worked like a charm—with only one small snag: The transactions had to pass through the bank's New York offices to be converted into dollars.
At the time, such maneuvering was legal, as long as banks vetted the deals for suspicious signs. But the U.S. government believed Iran was laundering its money to finance its nuclear weapons program. So Standard—which was also transferring cash for rogue states like Libya, Sudan, and Burma—took pains to cloak any hint of suspicion.
Bank executives gave employees detailed instructions on how to pull notes from their records to hide the involvement of off-limits nations, a process known as "repair." An internal memo warned that the repair plan "MUST NOT be sent to the U.S." Between 2001 and 2007, the bank moved $250 billion through America under this system.
Repair, of course, was illegal. In law-enforcement circles, it's called "stripping," and the U.S. Justice Department had already fined five other banks more than $2 billion for doing the same thing.
That left Standard's stateside executives increasingly nervous. In 2006, Ray Ferguson, then head of Standard Chartered Americas, warned the home office in a memo that doing business with Iran could subject them all "to personal reputational damages and/or serious criminal liability."
Standard's finance director, Richard Meddings, had a terse reply to that one, which would soon be splashed across the pages of newspapers in both countries.
"You fucking Americans," he wrote back. "Who are you to tell us, the rest of the world, that we're not going to deal with Iranians?"
The transfers continued.
At some point the feds caught wind of the scheme, launching an investigation into Standard's offices in New York, London, and Dubai. The bank disclosed this, in a way, in its 2010, 2011, and 2012 annual reports, writing that it was voluntarily reviewing its "historical compliance" with U.S. law.
Yet Standard had the good fortune of being caught during the bank-friendly Obama presidency. Despite taking office as the financial industry imploded, Attorney General Eric Holder began ramping down prosecutions for bank crimes. A new pattern emerged: The feds would conduct long, meandering investigations that ended with polite fines and no admission of wrongdoing. Standard seemed destined to be handled with the same kid gloves.
Then, seemingly out of nowhere, one man at one obscure government agency got impatient.
In August of last year, the New York State Department of Financial Services (DFS) blew the lid off Project Gazelle, issuing a complaint that charged Standard with moving billions for Iranian clients, "dealings that indisputably helped sustain a global threat to peace and stability."
These were the words of a plainly seething Benjamin Lawsky, DFS's superintendent.
The rest of the report was similarly furious. "For almost 10 years," Lawsky wrote, "SCB schemed with the government of Iran and hid from regulators roughly 60,000 secret transactions, involving at least $250 billion, and reaping SCB hundreds of millions of dollars in fees. SCB's actions left the U.S. financial system vulnerable to terrorists, weapons dealers, drug kingpins, and corrupt regimes, and deprived law enforcement investigators of crucial information used to track all manner of criminal activity."
Lawsky wanted to know why he shouldn't pull Standard's license to operate in New York—a move that would cost the bank billions. The financial world erupted in chatter.
From a sleepy federal investigation that was going nowhere fast to punishment that threatened Standard's very existence, it was clear there was a new sheriff in town.
But who the hell was Benjamin Lawsky?
At first, no one—not the feds who'd been overshadowed by Lawsky, not Standard itself—knew quite how to take the state bureaucrat's charges (and probably a few of them were busy Googling his name). The bank was baffled and angry. The feds were, according to multiple reports, embarrassed and irritated at being outflanked. Internal memos at the Treasury Department revealed that Lawsky had informed the agency of his intentions only "hours before" announcing the charges publicly.
The blowback was nasty. Standard rejected Lawsky's "portrayal of facts," conceding that it had transferred money illegally—but only $14 million.
Next came the implication that Lawsky's move was some sort of anti-British conspiracy designed to cripple London and favor New York. Mervyn King, governor of the Bank of England, the United Kingdom's central financial institution, implied that Lawsky had gone rogue. A columnist for the Financial Times accused Lawsky of burnishing his political prospects, ignoring the fact that his target, a gubernatorial appointee, wasn't running for anything.
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