(Provisional Translation)

February 20, 2004
Financial Services Agency
The Government of Japan

Administrative Actions on the Standard Chartered Bank, Tokyo Branch

1. According to the report by the Standard Chartered Bank, Tokyo Branch [hereinafter referred to as the ''Branch''] in response to the Reporting Order to the Branch by the Financial Services Agency [hereinafter referred to as the ''FSA''] based on the Article 24 (1) of the Banking Law, it was found that , while the Article 3 and the Article 4 under the Law on Customer Identification and Retention of Records on Transactions by Financial Institutions [hereinafter referred to as the ''Customer Identification Law''] stipulated that banks were obliged to check customer identification and produce transaction records, these obligations had been violated with respect to a series of remittance transactions by an underground finance group and a financial institution overseas in 2003 through the deals with the Custody and Clearing Services Department of the Branch. Violations were also found to the obligation to report suspicious transactions to the FSA based on the Article 54 of the Law for Punishment of Organized Crimes, Control of Crime Proceeds and Other Matters [hereinafter referred to as the ''Organized Crime Punishment Law''].
   
   In addition, a number of similar violations were found on other transactions through the Custody and Clearing Services Department of the Branch as a result of an internal investigation ordered by the FSA.
   
   Moreover, although there were several opportunities where the Branch could have voluntarily reviewed the internal operations to address the issue of the violations above, the internal control did not work properly, and the management did not respond appropriately to voluntarily improve compliance function until the FSA ordered the internal investigation.
   
   Several serious weaknesses as below in the internal control of the compliance functions of the Branch were also found as the causes of the violations and improper actions by the management above: (a) the lack of sufficient understanding of the management and the employees on relevant laws and regulations; (b) the lack of proper framework under which those transactions which would merit special attention from the view points of compliance could be checked and monitored by the types of transactions; (c) the deficiency of the function of internal auditing.
2. With the findings above, the FSA today took the following administrative actions to the Branch based on the Article 9 of the Customer Identification Law and the Article 26 (1) and 27 of the Banking Law.

1)	Suspension Order based on the Article 27 of the Banking Law The FSA suspended the Custody and Clearing Services business of the Branch to engage into business deals with new customers based on the Article 27 of the Banking Law. Simply maintaining the existing accounts and beginning new deals with the existing customers shall continue to be allowed. The suspension shall become effective as of February 27, 2004. After February 28, 2005, the FSA could review the suspension order in light of the progress made by the Branch with respect to the implementation of the Corrective Action and Business Improvement Plan ordered to submit by the FSA as stipulated in 2) below, when the Branch requests to the FSA for the resumption of the business suspended.
2)	Corrective Action Order based on the Article 9 of the Customer Identification Law and Business Improvement Order based on the Article 26 (1) of the Banking Law The FSA ordered the Branch to strengthen internal control system [including the enhancement of human resources and organizational aspects] to upgrade compliance functions with due emphasis on the following points:
	(a) To cope with the violations of the obligations to check customer identification and to produce transaction records in the Article 3 and the Article 4 under the Customer Identification Law respectively, the Branch should implement a fundamental review of its organizations and operations for managing customers [including reviewing the appropriate scope for outsourcing of a part of operations in the Custody and Clearing Services Department, the selection of providers of the services outsourced, and terms/conditions and controlling of the outsourcing]. (b) For the purpose of the fulfilling the obligation to report suspicious transactions to the FSA based on the Article 54 of the Organized Crimes Punishment Law, the Branch should implement a fundamental review of its organizations and operations for effective controlling its activities [including reviewing the appropriate scope for outsourcing of a part of operations in the Custody and Clearing Services Department, the selection of providers of the services outsourced, and terms/conditions and controlling of the outsourcing]. (c) The Branch should clarify who should be held accountable for the mismanagement of the Custody and Clearing Services and should clearly define the responsibilities of the management on them. (d) The Branch should take measures to make sure that relevant laws and regulations are properly understood and followed by the management and employees. (e) The Branch should review and strengthen the function of internal auditing of the Branch, including the follow-up process of it, with a view to ensuring proper operations and controls in line with relevant laws and regulations.
3)	The Branch must submit the Corrective Action and Business Improvement Plan to the FSA by March 22, 2004 and implement it promptly.
4)	The Branch must report the progress in the implementation of the plan to the FSA on a quarterly basis until its completion.