Lloyds Bank (LON: LLOY) share price continued its sell-off on Monday as it became the worst-performing FTSE 100 company. The shares plunged to a low of 41.07p on Monday, its lowest point since November as concerns about its business escalated. They have crashed by over 13% from their highest point this year.

Lloyds Bank could be about to get into legal trouble in the coming months after new allegations by the Financial Times. In a scathing report, the FT said that Iran had used Lloyds and Santander to evade sanctions by Western countries. The two banking giants have refused to comment on these allegations.

The allegations are that the two companies provided bank accounts to companies that were controlled by Petrochemical Commercial Company (PCC)). PCC has been used by Iran to raise money for the Revolutionary Guard, which has been sanctioned by Western countries.

This report could attract fresh scrutiny on these banks by the Financial Conduct Authority (FCA) and other regulators. US regulatory agencies could also be involved since it had sanctioned the company. US sanctions against Iran are aimed at preventing it from getting a nuclear weapon.

Many banks have in the past been forced to pay millions of dollars for facilitating payments to sanctioned companies. In 2012, HSBC was forced to pay $1.2 billion by the DoJ for money laundering and sanctions violations. 

Similarly, in 2015, BNP Paribas, a French banking giant, was forced to forfeit over $8 billion and pay a $140 million fine. In 2019, UniCredit, an Italian company paid $468 million and forfeited $316 million. 

Therefore, if these banks are found guilty, there is a likelihood that they will be forced to pay substantial fines by US and UK regulators. 

These fines will come at a difficult time for Lloyds, a British bank whose stock has struggled to find direction in the past few months. It remains 18% below its highest point in 2023 even as some other bank stocks like Unicredit and Danske Bank have surged. 

The focus now shifts to how this investigation will unfold and the bank’s earnings scheduled for February 22nd. These earnings will provide more color about the company’s performance last quarter and its efforts to cut costs.

LLOY chart by TradingView

Turning to the daily chart, we see that Lloyds stock price has been in a freefall in the past few weeks. In this period, the 50-day and 100-day Exponential Moving Averages (EMA) have now made a bearish crossover pattern. 

It has also dropped below the psychological support at 42p while the Relative Strength Index (RSI) has pointed downwards. Therefore, the outlook for the stock is still bearish and there is a likelihood it will plunge to below 40p soon.

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