[ by Howard Haykin ] N.Y.S. Regulator vs. Standard Chartered Plc.   Progress has been made between the accuser, Benjamin Lawsky, and the accused, Standard Chartered Plc.  Mr. Lawsky, the aggressive protagonist, who's been roundly criticized by regulators and political leaders in the U.S. and U.K., has succeeded in holding his ground - if not succeeding with some of his early demands. Standard Chartered reportedly has agreed to a New York Department of Financial Services demand that the bank hire an outside monitor to ensure compliance with U.S. AML laws. Mr. Lawsky mandated the demand for an outside monitor in an 8/6/12 order, and the two sides appear to have reached agreement ahead of an 8/15/12 hearing, at which Standard Chartered will be asked to explain why its license to do business in New York shouldn’t be revoked. NY Regulator's Allegations. New York banking Superintendant Benjamin Lawsky alleges that the NYC office of London-based Standard Chartered with flouting U.S. banking laws as part of a decade-long deception, helping to launder some $250 billion in Iranian funds - in contravention of U.S. statutes and without proper disclosure.  Lawsky reportedly is seeking as much as $700 million in monetary sanctions to settle the investigation. Reaction to Lawsky's Charges and Threatened Sanctions. Investors were clearly spooked by Lawsky's charges and harsh words for the bank, which led to last week's 16% sell-off of the stock.  Standard Chartered CEO Peter Sands issued a defiant response, saying the vast majority of wire transfers identified by Lawsky complied with federal law.  The bank’s shares recovered somewhat, but still lost about 10% for the week. Mr. Lawsky's threat to revoke the bank's New York license, would be the bank's absolute worst possible sanction.  At a minimum, it would significantly damage the bank’s corporate banking model and could result in a 40% drop in earnings, said Sanford Bernstein analyst Chirantan Barua, who's had an underperform rating on the stock since at least March. The New York regulator has grounds to shut Standard Chartered in the state even if he accepts the firm’s argument that it illegally laundered only a fraction of the $250 billion he claims. As the state’s top banking regulator, Lawsky has power to act in his discretion against any financial institution he deems untrustworthy, according to the charter of his year-old department. With regard to an independent monitor, the state regulator would make the selection and the bank would pay all related costs, while cooperating fully during the reviews.  Lawsky says he has not yet decided which outside monitor to hire, according to a person familiar with requirement but declined to be identified because the discussions are confidential. ‘Key Period’ of 2004-2007. Lawsky stated in the order that Deloitte & Touche, hired by Standard Chartered to provide regulators with an independent report on bank practices, complied with a bank request to remove from a draft "any reference to certain types of payments that could ultimately reveal SCB’s Iranian U-Turn practices."  Lawsky said Deloitte’s actions "apparently aided" the bank with its effort to hide dealings with Iran during the "key period" of 2004 to 2007. A spokesperson for Deloitte responded by email to say that "Deloitte FAS had no knowledge of any alleged misconduct by any Standard Chartered Bank employees and categorically denies that it aided in any way any violation of law by the bank." Standard Chartered Defensive Position. Since Lawsky’s order, Standard Chartered has focused its defense on the amount it laundered, saying it involved less than 1% of the 60,000 Iranian wire transfers asserted by Lawsky.  Yet, even if Standard Chartered’s position is legally sound, the order’s disclosure of internal e-mails suggesting a conspiracy to hide the identity of Iranian clients from regulators has given Lawsky grounds to act, according to legal experts. E-Mails, Once Again, a Smoking Gun. Standard Chartered’s e-mails, cited by Lawsky, provide suitable grounds for his action, according to Owen Watkins, a partner with the London law firm Lewis Silkin: "Making and publicizing the order was within the power conferred on Mr. Lawsky by section 39 of the New York Banking Law." He added, "On the basis of the order, you can see that the superintendent has an arguable case, with the e-mails and the comments made by certain Standard Chartered staff internally." Involvement of Other U.S. Regulators. Standard Chartered CEO Sands said on 8/8 that the normal practice in resolving such allegations is a “coordinated approach by the different agencies."  But, as of that date, the U.S. Treasury Dept, which has ultimate jurisdiction over whether Standard Chartered’s wire transfers complied with the law, said it was coordinating its efforts with other regulators in the case, which include the Federal Reserve, the Justice Department, the NY District Attorney and Lawsky’s department. Benjamin Lawsky will proceed, whether or not he does so with the other U.S. and NY regulators.  He's proceeding and there apparently is no stopping him. For further details, go to:  [Bloomberg, 8/11/12].