Benjamin M. Lawsky and the New York State Department of Financial Services upended the regulatory dynamics of the international banking world in August of 2012 when the New York agency reached a staggering settlement with Standard Chartered Bank. The Department of Financial Services accused the bank, which is headquartered in London, but maintains a profitable branch in New York, of violating laws related to United States sanctions imposed upon certain financial transactions with Iran. Although allegations of this sort are not unprecedented, Lawsky’s actions and the $340 million settlement were alarming because, in this case, the state regulator acted without any involvement from federal regulators, who were “on the verge of concluding” that the majority of Standard Chartered’s transactions with Iran were legal. The settlement illustrates the tension between state and federal regulators when confronted with alleged violations of law committed by a foreign bank. Specifically, the settlement raises the question of whether a state regulator should be involved in the regulation of a foreign bank operating in the United States, particularly when the bank is primarily violating federal laws that implicate issues of foreign policy. This Comment examines these issues, starting with an introduction of the statutory framework regarding the regulation of foreign banks, followed by a discussion of the various reactions to the Standard Chartered settlement, both positive and negative. This Comment then provides recommendations for resolving the issues raised by the settlement, ultimately concluding that the principle of comity paves the way for proper coordination and deference to the appropriate authority—whether state or federal—in the case of overlapping regulatory jurisdiction.
Kenneth S. Rosenzweig,
Regulation of Foreign Banks Operating in the United States: A State Regulator’s Controversial Pursuit of a London-Based Bank,
18 Fordham J. Corp. & Fin. L. 1021
Available at: http://ir.lawnet.fordham.edu/jcfl/vol18/iss4/6