'US fed probing RBS for possible violations of Iran sanctions'

The development comes at a time when two other banking majors -- Standard Chartered and HSBC -- have been pulled up by American authorities for various violations.

While Stanchart was found to have violated Iran sanctions, HSBC was charged with exposing the US financial system to terror financing and money laundering activities, among others.

"The UK bank (RBS) is being probed by the Federal Reserve and Department of Justice after volunteering information to them and UK regulators about 18 months ago," 'The Financial Times' said citing sources.

The newspaper said the bank uncovered the alleged violations after chief executive Stephen Hester initiated an internal review three years ago that saw the departure of a risk manager and led to internal criticism over control of the bank's regional compliance units.

The bank had agreed to pay USD 500 million in fines as part of a settlement with the Department of Justice two years ago. At that time, it had admitted that ABN Amro, the Dutch lender it bought in 2007, had violated US sanctions against Iran, Libya, the Sudan and Cuba.

"The probe marks the latest blow for RBS following a series of mishaps including an IT failure, widespread mis- selling of retail and small-business products and its involvement in the scandal over the alleged manipulation of Libor interest rates," the daily said.

RBS declined to comment on the issue, the daily added.

Financial Times noted that RBS has for several years been under intense scrutiny by the US and the UK authorities over perceived governance and risk-control deficiencies.

According to the daily, last year, the bank had signed an agreement with US authorities that forced it to improve its compliance with bank secrecy and anti-money laundering laws.

In its half yearly report, RBS has said it has initiated discussions with UK and US authorities to discuss its historical compliance with applicable laws and regulations, including US economic sanctions regulations.

Quoting the report, the daily said the investigation costs and liability incurred could have a material adverse effect on the group