--Financial watchdog will inspect HSBC, StanChart Korea internal
procedures for reporting suspicious transactions
--StanChard pledges full cooperation
--Checks will start at the end of the month and should be
quickly wrapped up
--Probe comes amid allegations by U.S. authorities that two U.K.
banks were involved in wrongdoing
(Adds Standard Chartered response and FSS comments)
By Kanga Kong
SEOUL--South Korea's financial watchdog will investigate whether
the local units of HSBC Holdings PLC (HBC) and Standard Chartered
(SCZ.ZM) were involved in money laundering, the Financial
Supervisory Service said Thursday.
"We will probe the Seoul branch of HSBC and Standard Chartered
Bank Korea in relation to (alleged) money laundering at their U.S.
and Mexico units," the FSS said in a statement. "We will look into
various issues related to (potential) money laundering, including
whether they reported suspicious transactions (to the authorities)
and verified their customers (before carrying out transactions) as
they're supposed to."
An FSS official, who declined to be named, told Dow Jones he
expects the investigation to start at the end of the month and that
it will be swift. "It's more like an inspection to check if there
have been suspicious transactions, if the banks have the right
internal systems to report such transactions and if they follow the
rules," rather than an investigation into specific allegations, the
official said.
Standard Chartered responded Thursday with a pledge to fully
cooperate with the FSS inspection, adding that the bank is "in
regular dialogue with our local regulators on all relevant
matters."
"Standard Chartered Group, including Standard Chartered Bank in
Korea, takes its responsibilities very seriously and seeks to
comply at all times with relevant laws and regulations," bank
spokesman Park Chong-hoon said in a statement.
The bank reiterated its strenuous denial of allegations made in
the U.S. that it helped Iranian banks violate U.S. sanctions and
misled regulators.
HSBC's Seoul branch declined to comment.
South Korea limits financial transactions of locally based
companies with six nations--including North Korea and Iran.
HSBC was accused by a U.S. Senate investigation of failing to
prevent money laundering at its Mexican subsidiary.
HSBC has accepted some wrongdoing took place. HSBC Chief
Executive Stuart Gulliver said last month the bank is working hard
to improve compliance.
Write to Kanga Kong at kanga.kong@dowjones.com
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