By Geetha Pillai and Oliver Tree

Shares in Standard Chartered PLC [LSE: STAN] plunged by almost a quarter on Tuesday as the British lender battled accusations by U.S. authorities it had laundered over $250 billion from Iranian banks.

The New York State Dept. of Financial Services (DFS) has ordered Standard Chartered to explain its alleged illegal money laundering and called the UK-based a "rogue institution."

The regulator is also planning to hold a formal hearing over the assessment of monetary penalties.

"The department's extensive investigation included the review of more than 30,000 pages of documents, including internal SCB [Standard Chartered] e-mails that describe willful and egregious violations of law," the DFS said in a statement.

Shares were down 24 percent at 11.17 pence at midday trading in London, while on the Hong Kong Stock exchange they closed 14.9 percent lower, the AP reported.

"For nearly a decade, SCB programmatically engaged in deceptive and fraudulent misconduct in order to move at least $250 billion through its New York branch on behalf of client Iranian financial institutions that were subject to U.S. economic sanctions, and then covered up its transgressions," the DFS said. "SCB's actions left the U.S. financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes, and deprived law enforcement investigators of crucial information used to track all manner of criminal activity," the US regulator added.

According to the DFS, Standard Chartered earned millions of dollars in fees for handling transactions on behalf of Iranian clients, which included the Central Bank of Iran/Markazi, Bank Saderat and Bank Melli.

Standard Chartered officials have denied the charges.

The allegations against Standard Chartered are the latest in a series of regulatory violations involving the U.S. arms of British banks.

Previous incidents include a $298 million settlement in 2010 by Barclays and a $350 million settlement by Lloyd's in 2009 for claims of trade law violations with financial institutions from countries under U.S. sanctions such as Cuba, Iran, Libya and Sudan.