The US Treasury Department and Federal Reserve were blindsided and angered by New York's banking regulator's decision to launch an explosive attack on Standard Chartered over its transactions tied to Iran, sources said.

By going it alone through the order he issued on Monday, Benjamin Lawsky, head of the recently created New York State Department of Financial Services, also complicates talks between the Treasury and London-based Standard Chartered to settle claims over the transactions, several of the sources said.

Lawsky's stunning move, which included releasing embarrassing communications and details of the bank's alleged defiance of US sanctions against Iran, is rewriting the playbook on how foreign banks settle cases involving the processing of shadowy funds tied to sanctioned countries. In the past, such cases have usually been settled through negotiation - with public shaming kept to a minimum.

In his order, Lawsky said Standard Chartered's dealings exposed the US banking system to terrorists, drug traffickers and corrupt states.

But the upset expressed by some federal officials, who were given virtually no notice of the New York move, may provide ammunition for Standard Chartered to portray the allegations as coming from a relatively new and over-zealous regulator.

But, given the content of the order - which described Standard Chartered as a 'rogue institution' that 'schemed' with the Iranian government and hid from law enforcement officials some 60,000 secret transactions over nearly 10 years - the bank may need to come up with a strong defense.

Lawsky did not respond to several requests for comment on Tuesday.

A spokesperson for the Federal Reserve said it had been working closely with various prosecutorial offices on matters involving Iran and other sanctioned entities, but could not comment on ongoing investigations.

White House Press Secretary Jay Carney said the government takes alleged violations of sanctions 'extremely seriously' and the Treasury remains in close contact with federal and state authorities on the matter. The Treasury declined to add to that comment.

New York's attack on Standard Chartered's integrity, and a threat to revoke its state banking license, wiped $17 billion off the bank's market value on Tuesday.

Shares in Standard Chartered slumped to a 3-year low of 10.92 pounds in London on Tuesday before closing down 16.4 percent at 12.28 pounds. The stock has fallen by a quarter since news of the New York action on Monday.

The loss of a New York banking license - effectively a permit to conduct transactions worth hundreds of billions of US dollars - could be a death knell for a global bank like Standard Chartered. The 160-year-old bank said it has been in talks with US authorities over its Iran transactions since early 2010 and the sudden accusations by New York were a shock. - Reuters