HSBC, StanChart face S.Korea tests

Aug 09, 2012, 11:14 AM EDT

* Regulator to check for potential money laundering

* Checks likely later this month - FSS official

* HSBC, StanChart face U.S. probes for money laundering

* India, Australia don't comment on individual banks

SEOUL, Aug 9 (Reuters) - South Korea's financial regulatorwill carry out spot checks this month on the local operations ofStandard Chartered and HSBC Holdings overmoney laundering allegations against the lenders in othercountries.

The Financial Supervisory Service (FSS) said in a statementon Thursday it would conduct the local checks after allegationswere made against the two British banks in the United States andMexico. It did not specify when the checks would take place,though an FSS official told Reuters they were likely later thismonth.

The regulator noted that HSBC's Mexican unit was fined lastmonth after failing to report suspicious financial transactionsrelated to the drugs trade, and the bank's U.S. unit isreportedly under investigation over money launderingallegations. The FSS also noted Standard Chartered's New Yorkbranch is being investigated over deals tied to Iran.

The FSS official, who declined to be named, said theregulator would likely conduct the checks late this month afterreviewing documents to see whether the banks' Korean units hadbeen involved in similar activities.

"The inspection will focus on whether these banks havereported (to regulators) any dubious transactions includingthose with countries subject to financial transaction sanctionsand whether they took their responsibility of checking customers(identification)," the FSS statement said.

 

COOPERATING

Park Chong-hoon, head of corporate affairs at StandardChartered's Korean unit, said the bank was in regular contactwith local regulators and "will cooperate fully with the FSS."Standard Chartered has strongly rejected the portrayal of factsin an order issued by New York's bank regulator this week whichaccused the bank of violating U.S. sanctions against Iran.

Chung Chi-hyang, spokeswoman for HSBC's Korean unit, saidthe bank would "provide all the information FSS is requesting ona timely basis and give any other support they need."

In July, HSBC set aside $700 million to cover fines andother costs after a U.S. Senate report criticised it for lettingclients shift funds from dangerous and secretive countries,notably Mexico.

Elsewhere in Asia, the Reserve Bank of India said it doesn'tcomment on issues involving individual banks - both HSBC andStandard Chartered have big offshore centres in India providingglobal support operations - and the Australian PrudentialRegulation Authority (APRA) said it was "not able to discuss anyentities that we regulate."

Standard Chartered shares listed in Hong Kong rose4.3 percent on Thursday, while HSBC gained 1.3percent.

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