* NY regulator says more than $250 bln transactions hidden
* Bank say regulator's order not "full and accurate"
* White House says takes sanctions violations seriously
* Standard Chartered shares fall 16.4 pct, touch 3-year low
By Nate Raymond and Steve Slater
NEW YORK/LONDON, Aug 7 (Reuters) - A New York bank regulator's broadside against Standard Chartered Plc over transactions tied to Iran left investors and the bank questioning the action, which on Tuesday wiped $17 billion off the bank's value.
The White House signaled its strong interest in the case, saying the U.S. government takes alleged violations of economic sanctions "extremely seriously."
London-based Standard Chartered said it has been in talks with U.S. authorities over its Iran transactions since early 2010 and said the public accusations by New York came as a shock.
The state's banking regulator, Benjamin Lawsky, called Standard Chartered a "rogue institution" and threatened to revoke its state banking license on Monday.
Lawsky, head of the state's Department of Financial Services, accused the bank of hiding 60,000 secret transactions worth $250 billion over nearly a decade. The transactions generated hundreds of millions of dollars in fees, Lawsky said.
Chief Executive Peter Sands scrambled back from vacation to help the bank plan a defense and limit damage to its reputation.
Shares in Standard Chartered closed down 16.4 percent at 12.28 pounds, taking their losses to 24 percent since the news surfaced just before Monday's close. They had earlier slumped as low as 10.92 pounds, their lowest for three years.
The White House said it took sanctions violations seriously but made no direct reference to Lawsky's action.
"Sanctions violations are something that this administration takes extremely seriously and has a strong record of action to this end," White House Press Secretary Jay Carney told reporters. "The Treasury Department remains in close contact with both federal and state authorities on this matter."
The inquiry into Standard Chartered is not the first time Lawsky has been involved in a state investigation of alleged conduct traditionally probed by federal investigators.
When he worked at the New York Attorney General's office, Lawsky helped spearhead a still unresolved 2010 lawsuit against Bank of America Corp over its acquisition of Merrill Lynch & Co, even while that bank was settling a similar case by the U.S. Securities and Exchange Commission.
Marc Greenwald, a former federal prosecutor who is now a partner at Quinn Emanuel Urquhart & Sullivan, said it is "not completely surprising" that Lawsky might press ahead now if he felt other regulators were moving too slowly.
Lawsky did not respond to several requests for comment.
The bank had been one of the least tarnished during the financial crisis because of its focus on emerging markets and conservative approach to capital and liquidity. It said Lawsky's order does not present "a full and accurate picture."
"Some people were walking around under the illusion that Standard Chartered was the world's first riskless bank, and it's not," said Gareth Hunt, financials analyst at Canaccord Genuity, who rates the stock a "sell." "We've discovered that Standard Chartered is a mortal bank -- as they all are."
Standard Chartered has hired two prominent law firms -- Sullivan & Cromwell in New York and Slaughter and May in London -- to represent it in its dealings with various U.S. authorities over transactions linked to Iran.
Among the Sullivan & Cromwell partners working for Standard Chartered is Rodgin Cohen, one of the best-known U.S. corporate lawyers, a person familiar with the matter said.
Sullivan & Cromwell has represented other non-U.S. banks probed for allegedly ignoring U.S. sanctions against countries.
Lawsky, in his order, described how officials at Standard Chartered had debated whether to continue its Iranian dealings, which he said exposed the U.S. banking system to terrorists, drug traffickers and corrupt states.
He said that on October 2006, the top official for business in the Americas warned in a "panicked message" that the Iranian dealings could cause "catastrophic reputational damage" and "serious criminal liability."
A group executive director in London shot back, according to a New York branch officer quoted in the order: "You f---ing Americans. Who are you to tell us, the rest of the world, that we're not going to deal with Iranians."
The reply showed "obvious contempt for U.S. banking regulations," the order said.
At that time the bank had five executive directors: Sands, now chief executive; Richard Meddings, now finance director; Mervyn Davies, a British Labour Party peer; Kai Nargolwala, who later joined Credit Suisse Group AG and left the Swiss bank last year; and Mike DeNoma, who this month departed as CEO of Chinatrust Financial Holding Co. Standard Chartered's Americas CEO was Ray Ferguson, who is now its Singapore CEO.
These people either declined to comment or could not immediately be reached for comment.
U.S. RULES "UNCLEAR"
The loss of a New York banking license would be a devastating blow for a foreign bank, effectively cutting off direct access to the U.S. bank market.
Lawsky said Standard Chartered processes $190 billion every day for global clients.
The United States imposed economic sanctions on Iran in 1979. Until November 2008 U.S. banks could process some transactions for Iranian banks or individuals provided they were initiated offshore by non-Iranian foreign banks and were on the way to other non-Iranian foreign banks. Such transactions were known as "U-turns."
David Proctor, who worked for Standard Chartered from 1999 until 2006 and who oversaw the Iran business briefly in 2006 when he was CEO in the United Arab Emirates, said the rules on dealing with Iran were unclear.
"At the time (May 2006), ... the key question was to try and understand exactly what counted as a U-turn transaction," he said.
Proctor, who now provides advice for banks with BAS Consulting in Singapore, added that Standard Chartered now has to help clear up what actually happened. "Banks these days don't have a choice," he said. "You have to be transparent."
Standard Chartered put the value of Iran-related transactions that did not comply with regulations at less than $14 million, contrasting sharply with the New York regulator's estimate of $250 billion.
It also called Lawsky's interpretation of the U-turn exemption "incorrect as a matter of law." Standard Chartered must appear before the Department of Financial Services on Aug. 15.
Standard Chartered is the sixth non-U.S. bank implicated since 2008 over alleged dealings with sanctioned countries.
Barclays Plc, Lloyds Banking Group Plc, Credit Suisse and ING Bank NV have agreed to fines and settlements totaling $1.8 billion, while regulatory filings show that HSBC Holdings Plc is under investigation.
Separately, Barclays agreed in June to pay $453 million to settle U.S. and British probes that it rigged Libor, a global lending benchmark, while a month later a U.S. Senate panel faulted HSBC efforts to police suspect transactions, including with Mexican drug traffickers.
The cost to protect 10 million euros of Standard Chartered debt against default for five years rose on Tuesday to 166,000 euros from 140,000 euros on Monday, according to Markit.