Citing “a lack of independent judgment,” New York’s Department of Financial Services Department announced on Monday that it will deny Promontory Financial Group, one of the world’s most influential bank consultants, access to confidential supervisory bank information, a move that prevents it from engaging in regulatory work with financial institutions the state regulator oversees. The action comes on the heels of a report, also released on Aug. 3, detailing work Promontory did for British bank Standard Chartered when it was accused of violating U.S. sanctions on Iran.

In 2012, NYDFS went public with accusations that British bank Standard Chartered conspired to conceal at least $250 billion in transactions with the Iranian government that were moved through its U.S. subsidiary. The investigation uncovered 60,000 secret transactions with Iran. In 2012, the bank paid state and federal regulators $667 million over the violations; was fined another $300 million by NYDFS. Deloitte Financial Advisory Services was fined $10 million and banned for one year from work in New York  state after the authorities said it did not exercise independence in its work with the bank.

Now, it is Promontory’s turn on the hot seat. After investigating work the firm performed on behalf of legal counsel for Standard Chartered between 2009 and 2011, NYDFS says the firm “exhibited a lack of independent judgment in the preparation and submission of reports” that were submitted to regulators throughout the investigation.

As early as 2007, Standard Chartered hired Promontory to work with it on matters related to the bank’s compliance with the Bank Secrecy Act, anti-money laundering laws and regulations, and sanctions imposed by the Treasury Department’s Office of Foreign Assets Control. In April 2010, Promontory was retained to review transaction records “with certain countries or certain Specially Designated Nationals” subject to OFAC sanctions. The engagement, known as Project Green, produced a number of reports and made presentations to the bank and government authorities. NYDFS’ investigation of Standard Chartered relied, in part, upon these reports to identify the scope of the bank’s improper conduct. Promontory earned $54.5 million in total revenue from its work on Project Green.

NYDFS accuses Promontory of putting a bank-friendly spin on facts that emerged during its purportedly independent and impartial reviews and reports.

“One senior analyst wrote during Project Green, ‘the most important thing is that we get to the end of the project without jeopardizing our relationship with [Standard Chartered Bank] as a whole.’ There are numerous instances where Promontory, at the direction of the bank or its counsel, or at its own initiative, made changes to ‘soften” and ‘tone down’ the language used in its reports, avoid additional questions from regulators, omit red flag terms or otherwise make the reports more favorable to the bank,” the NYDFS report says.

The report also quotes a Promontory official as saying that, in engagements like Project Green, it is not required to be “transparent” with regulators. Linguistic choices in final reports (as compared to original drafts), obfuscated failures of the Bank’s compliance systems,” NYDFS claims, citing instances where, at the request of the bank’s legal counsel, language was “toned down.” On Jan. 22, 2011, a senior analyst wrote, regarding a report, that “no question the bank is going to have a big problem in trying to present some of these figures…and our report can go a long way to softening the blow.”

In a statement issued Monday morning, Promontory said that it will seek a stay of the NYDFS action in New York State Supreme Court. “We will litigate the matter and defend our firm against this regulatory overreach,” it said. “We stand behind the integrity of our professionals and the quality of our work, the accuracy of which the order does not dispute. We believe the department has willfully misconstrued our work based on a handful of emails taken out of context.”

That statement says that Promontory reviewed approximately 131,000 Standard Chartered transactions from 2001 to 2007, totaling more than $590 billion, and the two-year-long NYDFS investigation identified no substantive errors. “Working with outside counsel, we have thoroughly reviewed how we conducted this engagement, examining thousands of emails and other documents,” the statement says. “We are convinced that an impartial review of the facts will show that our professionals acted at all times with appropriate independence and an unwavering commitment to factual accuracy.”