Banking industry officials say it's unheard of: A state regulator, flying solo, threatens to take away the state license of a global bank — and then secures a very public settlement.

That's exactly what happened in New York this past week, when the state's Department of Financial Services reached a settlement with Britain's Standard Chartered Bank over allegations that it schemed with the Iranian government to launder billions of dollars.

So who is the man who dared to leapfrog over federal regulators? He's Benjamin Lawsky, the 42-year-old who was appointed less than a year ago to the newly formed state agency by Gov. Andrew Cuomo.

State Steps Out, Ahead Of The Fed

Lawksy and the agency moved forward without federal regulators, who had also reportedly been reviewing similar allegations. Karen Shaw Petrou at Federal Financial Analytics says it's a shock that foreign bankers are still absorbing.

"Many of them had not taken the ability of New York state to be a meaningful or even a very aggressive regulator as seriously as they should have," Petrou says. "They got one heck of a wake-up call."

Standard Chartered agreed to pay the state of New York a $340 million fine. The state said the bank allegedly conducted 60,000 transactions for Iran that left the U.S. vulnerable to terrorists and drug kingpins.

Harvard Law Professor Hal Scott says state regulators traditionally act as a backstop to federal regulators on these types of allegations, but not this time.

"What might have been regrettable here is that once the state authorities got onto this, they seemed to keep the federal authorities out of the loop," Scott says.

A Man From The Southern District

Lawsky's friends, such as Neil Barofsky, a senior fellow at NYU Law School, say his character was shaped as an assistant U.S. attorney in New York's Southern District. The district was known as an island of independence, separate from the mother ship, the U.S. Department of Justice.

"There was never any shame in losing a case in the Southern District," Barofsky says. "The only shame that would come is from not being aggressive and not trying to do the right thing."

Federal Judge Jed Rakoff, known for his independent orders and opinions from the bench, is also a product of the Southern District. He takes the characterization a step further.

"Down in Washington, with a mixture of envy and sarcasm, they refer to it as the sovereign district of New York," Rakoff says.

It is exactly the type of place where a young prosecutor could cultivate a strong backbone, but some bankers have labeled Lawsky a rogue regulator. Chip MacDonald, a managing partner in financial services with Jones Day, says New York should have held off.

"I think they acted prematurely," MacDonald says. "It would be more helpful to both the public financial stability and international relationships for them to come to a conclusion at the same time."

A Win For New York's Governor

For better or worse, New York regulators and prosecutors have a long history of independent action that often catapults them to the national political stage.

Stu Loeser, who until last week was New York Mayor Michael Bloomberg's longest serving press officer, says the settlement with Standard Chartered Bank is a political coup, not so much for Lawsky but for New York's Gov. Cuomo.

"The governor is the one who elevated him; the governor is the one who did what Washington has failed to do," Loeser says.

Cuomo's aspirations for political office are well-known, and this action might help solidify his reputation.

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