MUMBAI • India’s anti-money laundering agency fined Standard Chartered plc (StanChart) one billion rupees (RM60 million) for breaking foreign-exchange (forex) rules when it worked on the take-over of a local bank, marking one of the country’s biggest penalties imposed on an overseas lender.
An eight-year probe found that StanChart violated the so-called Forex Management Act — which monitors offshore financial transactions — when it worked with a group of investors to buy a stake in Tamilnad Mercantile Bank Ltd (TMB) in 2007, according to an August order from India’s enforcement agency that was seen by Bloomberg.
“Senior officials at StanChart saw an investment in TMB shares as an opportunity that might ripen into an eventually larger owner- ship for the bank,” Sushil Kumar, the enforcement agency’s special director, said in the order.
A representative for the British lender confirmed receipt of the order, adding that the bank was evaluating it and so unable to comment further.
StanChart — India’s largest foreign bank by branches — has been operating in the country for more than 160 years and has about 100 outlets. The bank also acted as a custodian for shares on the deal, according to the order. TMB was fined almost 170 million rupees for similar charges, the order said.
A spokesman at TMB declined to comment, while the Enforcement Directorate didn’t immediately respond to an email seeking comment.
The case dates back to about 13 years ago when TMB transferred 46,862 shares to overseas investors, including GHI Ltd, Swiss Re Investors, FI Investments (Mauritius) Ltd and Cuna Group (Mauritius) Ltd, without seeking permission from India’s central bank, according to the order. Some of those shares were then transferred to Sub-Continental Equities Ltd, an affiliate of StanChart in April 2008, without the Reserve Bank of India’s permission, it said.
The transfers were done through escrow accounts with StanChart, which acted as a transaction agent and a lender to one of the investors on the deal, the order said.
“StanChart, through its affiliate Sub-Continental, was a proposed and eventually an actual investor in TMB shares to be purchased through the escrow agreement arrangements,” Kumar said. — Bloomberg