Standard Chartered fined ₹100 crore for violating forex norms1 min read . Updated: 08 Sep 2020, 09:57 PM IST
An 8-year probe found that Standard Chartered violated the FEM Act—which monitors offshore financial transactions —when it worked with a group of investors to buy a stake in Tamilnad Mercantile Bank in 2007
The Enforcement Directorate (ED), India’s anti-money laundering agency, fined Standard Chartered Plc $13.6 million (Rs100 crore) for breaking foreign exchange rules when it worked on the takeover of a local bank, marking one of the country’s biggest penalties imposed on an overseas lender.
An eight-year probe found that Standard Chartered violated the Foreign Exchange Management Act—which monitors offshore financial transactions —when it worked with a group of investors to buy a stake in Tamilnad Mercantile Bank Ltd. in 2007, according to an August order from ED that was seen by Bloomberg.
“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, 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.
Standard Chartered—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. Tamilnad Mercantile was fined almost ₹17crore for similar charges, the order said.
A spokesman at Tamilnad Mercantile declined to comment, while the ED didn’t immediately respond to an email seeking comment.
The case dates back to about 13 years ago when Tamilnad Mercantile transferred 46,862 shares to overseas investors, including GHI Ltd, Swiss Re Investors, FI Investments and Cuna Group, without seeking permission from the Reserve Bank of India (RBI), according to the order. Some of those shares were then transferred to Sub-Continental Equities Ltd, an affiliate of Standard Chartered in April 2008, without RBI’s permission, it said.