Lawsky’s Bank-Busting Reputation Looms Over Pact With Iran

By | July 17, 2015

Benjamin Lawsky’s bank-busting reputation may have earned him his own tribute in this week’s landmark Iran nuclear agreement.

Lawsky was the first superintendent of New York’s beefed-up banking and insurance overseer, which gave him enforcement power over international banks chartered in the state. In cases involving sanctions violations, he required banks to dismiss staff, appointed intrusive monitors and added billions of dollars to settlements.

In a world where enforcement deals are usually made by national authorities, the state regulator’s moves irritated many European bankers and officials, lawyers in the field say.

That’s why several of these people say he’s the inspiration for a line buried deep inside the Iran accord, which outlines what Tehran needs to do for economic sanctions to be lifted.

They point to paragraph 25 of the more than 100-page document: “The United States will actively encourage officials at the state or local level to take into account the changes in the U.S. policy,” it reads, “and to refrain from actions inconsistent with this change.”

That “appears to be a signal to state and local regulators that they are expected to follow the lead of the federal government and not chart their own course,” said Eytan Fisch, a former official at the U.S. Treasury’s Office of Foreign Assets Control who’s now at Skadden Arps Slate Meagher & Flom LLP.

A Warning

Other lawyers were less circumspect. One attorney who specializes in sanctions cases said the passage was a warning to any state official who aspired to follow in Lawsky’s footsteps. He asked not to be named because his conversations with bankers and regulators are confidential.

The clause could also be applied to another official, Manhattan District Attorney Cyrus Vance Jr. Since 2010, Vance’s office has originated many of the cases against banks related to Iran sanctions. Joan Vollero, a spokeswoman for Vance, said, “It doesn’t appear that this change will affect any open or closed cases,” referring to the possible lifting of sanctions.

Since 2008, state and federal regulators in the U.S. have stepped up enforcement against European banks that transferred money on behalf of Iranian clients, reaching deferred-prosecution agreements with the firms and collecting billions of dollars.

Starting in 2012, Lawsky became an active player, threatening to pull the license of Standard Chartered Plc to operate in New York State — and therefore in the U.S. — over the London-based lender’s practice of stripping the names of Iranian clients from many wire transactions.

The threat caused the bank’s shares to drop 16 percent in a single day and angered other U.S. regulators, who felt they had been upstaged by Lawsky, said people involved in the matter.

Last year, as a condition for allowing BNP Paribas SA to maintain its license to operate in New York after a guilty plea for sanctions violations, Lawsky insisted the bank fire senior executives. He also ordered it to cease dollar-clearing operations in several offices for a year. The bank paid $8.97 billion to settle the case.

Lawsky stepped down from his position a month ago and has opened a consulting firm specializing in cybersecurity for banks. His deputy, Anthony Albanese, has been appointed interim head of the office. Matthew Anderson, a spokesman for New York’s Department of Financial Services, declined to comment.

Told about the clause by telephone, Lawsky sighed, then declined to comment.


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