• by Thom Forbes  @tforbes, August 9, 2012

Forget about the stiff upper lip and all that. British bank Standard Charter is responding to charges by a pugnacious New York State regulator that it laundered Iranian funds to the tune of $250 billion by swinging back hard. Sources tell the Financial Times’ Kara Scannell and Patrick Jenkins that it is considering “legal redress.” CEO Peter Sands had no comment on that tactic, “but he made no secret of his irritation at the damage done to StanChart,” they write.

“Our reputation has been damaged,” Sands says. “It’s not worth pretending that isn’t the case.”

And that besmirching not only has colleagues but also indigenous critics “circling the wagons” around the beleaguered institution, which is seen to be a victim of “American overreaching,” according to Landon Thomas Jr., writing from London for the New York Times.

“On Wednesday, even Mervyn A. King, the central bank governor who has been one of the industry’s harshest scolds, seemed to defend Standard Charter against the New York allegation that it had schemed with the Iranian government to launder billions of dollars for the potential support of terrorist activities,” writes Thomas, who also talks to M.P. John Mann, a self-avowed “I am no apologist for British banking.” Mann sees an “anti-British bias” at play.

At a press conference, King said: “All that the U.K. authorities would ask is that the various regulatory bodies that are investigating a particular case try to work together and refrain from making too many public statements until the investigation is completed” –- a request that Thomas characterizes as “a notable demand for forbearance” from the man credited with being the prime mover in the eventual dismissal of Robert E. Diamond Jr. as CEO of Barclays.

The regulator at the center of the controversy is “Ben ‘long-arm-of-the’ Lawsky,” quips Patrick Clark in the New York Observer. It turns out that he and his agency are “rattling” other regulators in the U.S. as well as the Brtis, as a WNYC.org hed suggests, with its sudden and unilateral strike.

Among the rival regulators who “aren’t happy” with his action at the head of the nine-month-old New York State Department of Financial Services are the U.S. Treasury Department, Justice Department, Federal Reserve and Manhattan District Attorney’s Office, the Wall Street Journal’s David Weidner reports. Lawsky’s aggressive stance is reminiscent of Eliot Spitzer, back in the day when he was an untarnished young bull loose on the Street as New York State Attorney General. 

“Like Mr. Spitzer before him, Mr. Lawsky’s independence has the potential to upend the way Wall Street is policed,” Weidner writes. 

The Treasury Department and Federal Reserve, in particular, “were blindsided and angered” by Lawsky’s action, sources tell Reuters. 

“Lawsky's stunning move, which included releasing embarrassing communications and details of the bank's alleged defiance of U.S. sanctions against Iran, is rewriting the playbook on how foreign banks settle cases involving the processing of shadowy funds tied to sanctioned countries. In the past, such cases have usually been settled through negotiation -- with public shaming kept to a minimum.”

So who is Benjamin Lawsky? He’s 41, a graduate of Columbia and Columbia Law School who was a Special Assistant to Attorney General Andrew Cuomo and then briefly served at the newly elected governor’s chief of staff before becoming Superintendent of Financial Services in May of 2011. He fashioned himself as the “new cop on the beat” when he took the reins of the agency,” the Telegraphreports.

Business Insider’s Julia La Roche has the skinny on other factoids about the previously “little known” prosecutor, right down to the fact that he is a marathoner (4:10:59 in NYC in 2008) and huge fan of the Pittsburgh Steelers (a condition he evidently shares with Rush Limbaugh and his new nemesis, Howard Fineman).

“Ben Lawsky didn't take this job to be a quiet, unnoticed back-office regulator," Steve Cohen, chief of staff for Cuomo when he was New York’s attorney general, tells Reuters’ Joseph Ax. “And Gov. Cuomo didn't give him the job so that he could have a quiet, unnoticed existence.”

Naked Capitalism blogger Yves Smith writes that he hopes Lawsky “has balls of steel. He will need them.” He may be able to ride all the blowback from just about everyone who is perturbed about being in the headlines (or perturbed that they’re not). “The key is whether Cuomo continues to back him,” Smith writes.

So, the PR gloves are off in what promises to be a battle of headline-grabbing for some time to come -- or at least until the next financial scandal sets itself up for another haymaker from another earnest regulator.