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UPDATE 2-StanChart agrees extension of U.S. sanctions scrutiny

(Adds context, further details, updates dateline)

LONDON, Nov 10 (Reuters) - Standard Chartered said it faces a further extension of its U.S. deferred prosecution agreements (DPAs) until July next year, in a sign it has yet to improve its sanctions compliance to the satisfaction of U.S. authorities.

StanChart first entered into the agreements with the U.S. Department of Justice and the New York County District Attorney's Office in December 2012, accepting that it had broken laws by processing payments for sanctioned entities in countries including Iran, Burma, Sudan and Libya.

The bank avoided prosecution in exchange for a cash settlement of $327 million and an agreement with the U.S. authorities to improve its sanctions compliance.

The DPAs were extended for a further three years in 2014, as StanChart sought to strengthen its controls under the scrutiny of an independent monitor tasked with reporting on its progress.

Reuters reported in September the likely extension of the bank's U.S. supervision, as sources at the bank said upgrading its technology worldwide to meet stringent U.S. standards was proving a daunting task.

The monitor appointed to oversee StanChart's settlement, Ellen Zimiles, global head of investigations at Navigant Consulting Inc and a former prosecutor, has tested the software used by the bank and found that the bank's processes missed millions of possible violations.

StanChart said on Thursday its DPA will now end at the same time as the independent monitor's oversight on July 28, 2018.

"The agreement acknowledges that the Group has taken a number of steps and made significant progress to comply with the requirements of the DPA and enhance its sanctions compliance programme, but that the programme has not yet reached the standard required by the DPA," it said.

In a deferred prosecution agreement a prosecutor agrees to grant amnesty in exchange for the defendant agreeing to fulfil certain requirements, and StanChart could face prosecution and further fines if it reoffends.

The bank is also being investigated over whether it continued to violate Iran-related sanctions after 2007, in violation of the deferred prosecution agreements between the bank and U.S. state and federal prosecutors.

Thursday's statement from the bank said it continues to cooperate with that investigation, but that more time is needed.

StanChart says it now spends more than a billion dollars a year on compliance, up more than 40 percent from 2014. (Reporting by Lawrence White; additional reporting by Yashaswini Swamynathan in Bengaluru; editing by Alexander Smith)