The UK’s Standard Chartered bank has been accused by the New York State’s financial watchdog of hiding at least $250bn-worth of transactions for Iranian clients, in contravention of US sanctions.

The allegations, revealed by the New York State Department of Financial Services (DFS), accuse the bank of “wilful and egregious violations of law”.

The UK lender has been ordered to present a defence for its actions to the regulator on 15 August and has also been told to explain why it should not be stripped of its licence to operate in New York.

Standard Chartered’s actions are alleged by the DFS to have left the “US financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes, and deprived law enforcement investigators of crucial information used to track all manner of criminal activity”.

Specifically, the watchdog accused the bank of “wire stripping”, or removing details that identify Iranian clients on transactions to process offshore transfers that involve Iran, but begin and end with a non-Iranian foreign bank; so-called U-turns.

Standard Chartered said in a statement that it “strongly rejects the position or the portrayal of facts as set out in the order by the DFS”. It added that more than 99.9 per cent of transfers related to Iran complied with regulations, and that the “total value of transactions which did not follow the U-turn was under $14m”.

The bank added that “the Group’s review of its Iranian payments also did not identify a single payment on behalf of any party that was designated at the time by the US Government as a terrorist entity or organisation”.