UPDATE 3-StanChart told to say sorry over US sanctions comments

* Manhattan, federal prosecutors demanded statement

* StanChart violated deferred prosecution deal-prosecutors

* StanChart chairman "very much" regrets March 5 comments

* Comments were about breaches of U.S. sanctions on Iran

By Steve Slater and Aruna Viswanatha

LONDON/WASHINGTON, March 21 (Reuters) - Standard Chartered bowed to pressure from U.S. authorities and apologizedon Thursday for comments by the bank's chairman denying the bankhad intentionally breached U.S. sanctions on Iran.

The highly unusual retraction and apology was forced on thebank by the U.S. Justice Department and the Manhattan DistrictAttorney's Office, those agencies said.

In a $667 million settlement of charges it violated U.S.sanctions against Iran, Sudan, and other countries, London-basedStandard Chartered last year agreed to deferred prosecutionagreements with the New York and federalprosecutors.

Standard Chartered Chairman John Peace said on March 5 at apress conference with reporters that the bank "had no willfulact to avoid sanctions."

In Thursday's statement he said those comments were "bothlegally and factually incorrect" and he retracted them.

Peace "blatantly contradicted the bank's acceptance ofresponsibility for its crimes," Michael Passman, spokesman forthe Justice Department's criminal division, said in a statement.

"Under the terms of our agreement, Standard Chartered wasrequired to retract the statement or be subject to prosecution,"Passman said.

The department and the Manhattan District Attorney's officetold the bank about the discrepancy, which led to theretraction, Passman said.

"As part of these agreements, we rigorously monitor thebanks for continued compliance," said Joan Vollero, deputydirector of communications for the Manhattan District Attorney.

"Under the terms of our agreement, we demanded a publicrepudiation and they complied," she said.

"UNEQUIVOCALLY ACKNOWLEDGES"

In the Thursday statement, Pearce said his earlier commentscontradicted the bank's acceptance of responsibility.

"To be clear, Standard Chartered Bank unequivocallyacknowledges and accepts responsibility ... for past knowing andwillful criminal conduct in violating U.S. economic sanctionslaws and regulations," Peace said.

He said he "very much" regretted his earlier comments, which"were at best inaccurate".

The bank said the statement followed discussions with thetwo U.S. agencies, but declined further comment.

The settlements by Standard Chartered related totransactions for customers in sanctioned countries Iran, Sudan,Libya and Burma between 2001 and 2007.

U.S. authorities accused the bank of leaving out informationfrom U.S. dollar wire payments, preventing regulators fromidentifying suspicious activity.

Before Standard Chartered settled the case with criminalauthorities in December, New York banking regulator BenjaminLawsky moved forward separately and threatened to revoke thebank's license over the conduct.

The move angered UK politicians and regulators, and otherU.S. regulators who had spent more than two years investigatingthe bank and wanted a more coordinated settlement before Lawskymade public his accusations in August.

The demand by U.S. authorities for Standard Chartered toissue a public apology is further evidence of the tough stancethey are taking, and is a warning shot to other banks.

The Justice Department often bars companies it settles withfrom publicly contradicting the allegations at issue, but suchprovisions are not often invoked in public retractions.

New York and federal prosecutors have reached six deferredprosecution agreements with European banks for violating U.S.sanctions over the past four years, including with HSBC, ING, Barclays, Credit Suisse and Lloyds.