THE Royal Bank of Scotland is being investigated by US authorities over possible breaches of sanctions against Iran.
The Federal Reserve and Department of Justice are looking at potential infringements after RBS volunteered information to US and UK regulators around 18 months ago.
The investigation could result in a substantial fine for the Edinburgh-based bank, which is part- owned by the state.
News of the probe comes one week after Standard Chartered agreed a $340 million (£217m) settlement with regulators over allegations it hid $250 billion (£160bn) of transactions with the Iranian government.
RBS uncovered the possible breaches in an internal review launched by chief executive Stephen Hester soon after he joined the bank three years ago.
Reports yesterday suggested the in-house investigation had already led to the departure of a senior risk manager, although the bank refused to confirm this.
An RBS spokesman also declined to comment on the investigation but the bank's half-year report earlier this month indicated it had "initiated discussions with UK and US authorities to discuss its historical compliance with applicable laws and regulations, including US economic sanctions".
The report added: "Although the group cannot currently determine when the review of its operations will be completed or what the outcome of its discussions with UK and US authorities will be, the investigation costs, remediation required or liability incurred could have a material adverse effect on the group's net assets, operating results or cash flows in any particular period.
"The group may become subject to formal and informal supervisory actions and may be required by its US banking supervisors to take further actions and implement additional remedial measures with respect to these and additional matters."
Regulators are said to be examining a number of banks amid concerns of illicit dollar transactions with Iran ahead of the introduction of strict rules in the US in 2008.
Standard Chartered was accused by the New York State Department of Financial Services of keeping around 60,000 transactions secret from US regulators over nearly 10 years.
But the bank, which employs 2100 staff in the UK, said it "strongly rejects" that portrayal despite agreeing a settlement.
The RBS investigation is thought to centre on far smaller potential breaches.
However, it deals yet another blow to the group after an embarrassing IT failure this year, mis-selling of retail and small business products and, more recently, involvement in a US legal case on alleged rigging of the Libor interbank rate.
RBS, HSBC and Barclays were last week among seven banks to have been summoned for questioning by the attorneys general of New York and Connecticut as part of an inquiry into the Libor scandal.
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