The Central Bank (CB), two weeks ago in a delayed action, imposed a fine of $241 million on Standard Chartered Bank (SCB) for violating CB rules in remitting monies – some years back– to counter-party institutions as payment connected to hedging transactions, banking industry sources said.
The CB letter to the SCB was sent on March 17, a week before proceedings in the SCB action against the Ceylon Petroleum Corporation (CPC) began in the London Commercial High Court. The foreign bank has been ordered to pay the fine within a month.
Asked whether the bank would pay the fine or face a penalty, SCB CEO Anirvan Ghosh Dastidar said the bank always functions and operates in line with local laws and regulations. “We take very seriously the integrity of our procedures and policies as a leading international bank and will defend vigorously our reputation,” he said in a statement, adding “as the matter is between the regulator and the bank it would be inappropriate for us to comment further”.
The Central Bank says despite instructions not to do so, the SCB had transferred these monies to overseas parties. In a June 2009 action in the Supreme Court seeking to restrict the CPC and the government from participating in arbitration proceedings brought by foreign banks in the oil hedging deals, public interest activist Nihal Sri Ameresekera said that “regardless of specific directions given in or about December 2008 by the CB’s Monetary Board, Standard Chartered Bank remitted in valuable foreign exchange a sum exceeding US$100 million between December 2008 and April 2009, and was endeavouring to remit a further sum exceeding US$20 million on ‘Back to Back Agreements’ entered into with one or more foreign parties.”
The SCB claim case for $161 million in dues from the CPC is currently underway in London with a team from Sri Lanka including Attorney General Mohan Peiris representing the government.
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