REVEALED:
Why the Standard Chartered scandal is different
26
April, 2012
What
Labour MP John Mann calls “a concerted effort to win the commercial
battle to have trading from London shifted to New York” is
beginning look only partly correct. Over the last 24 hours, Slog
sources and reports in several MSM titles suggest that geopolitical
deals, domestic political victimisation, Wall St games, and
internecine US governmental rivalries are also involved.
In
and around the corridors of Standard Chartered Bank’s senior
management floor, people are in something of a daze. There is, I’m
told, a genuine befuddlement as to why SCB has suddenly had such
serious charges launched against it…and why the near-legendary CEO
Peter Sands has been seemingly caught on the hop by them.
Standard
Chartered does not in any way fit the profile of the Wicked
Investment Bank: although most of its British contemporaries
have been bailed out, Sands has guided this august institution to
huge profits in the worst of all times. But as the senior management
stresses, Standard Chartered does not have
an investment bank. No derivative paper trails, silly sovereign
debtors, or dodgy tax haven products for them, we are told: astute
investment flair and loyal, grateful clients are the basis of their
undoubted success. Hmm.
“I
simply can’t believe it,” said one such client yesterday, “in
no way do these severe accusations reflect the bank I’ve known for
over twenty years.”
It
wasn’t just that New York state Monday evening threatened to revoke
SCB’s licence – and charge the bank with a cool $250 billion
worth of secret transactions with Iran. It was the concerted way in
which NYS wound up the media into a frenzy of bile. Standard
Chartered had, said the prosecutor’s office, been “operating as a
rogue institution”, conducting in excess of 60,000 illegal deals
with the Ayatollahs in Tehran, some of which – it charged – had
“exposed the United States to extreme danger from terrorists”.
In
a 27-page order, the Superintendent of Financial Services Benjamin
Lawsky of DFS said that “grounds exist for revocation of Standard
Chartered Bank’s licence to operate in the State of New York and
that interim measures must be taken to protect the public interest.”
In turn, the order accused Standard Chartered of being ‘motivated
by greed.’
And
‘thinking’ opinion in New York was quick to jump on the wagon:
“It’s
not going to be helpful that the management team was basking in the
glory saying that they weren’t hit by compliance scandals,” said
Gary Greenwood at Shore Capital. “It doesn’t look good as they
probably ought to have known this was going on.”
The
real rogue here is Lawsky and his office. Effectively, Standard
Chartered is being perped…and the commentariat already has Sands
down as guilty.
Having
studied the
DSK case from
the outset, I’m getting a very strong feeling of deja vu on this
one.
Here
are some facts worth noting:
1.
Standard Chartered’s U.S. dollar clearing business is the seventh
largest in the world.
2.
Lawsky’s filing is compelling, but he jumped the gun – why? The
Treasury Department’s Office of Terrorism and Financial
Intelligence is normally ruthless in such cases. These are very, very
powerful guys. For them not to have pursued it anywhere as
aggressively as a vastly less well wartered provincial regulator –
particularly when Iran is now the designated Enemy Satan – is,
shall we say, somewhat malodorous.
3.
Standard Chartered shares have fallen by a quarter since news of the
New York action on Monday. If that continues, they are soon going to
be a takeover target. (see Pt 1 above)
4.
Although I began this investigation Monday evening BST, this morning
Reuters reports that ‘Treasury’s Office of Foreign Assets
Controls (OFAC) has been blind-sided and angered’ by Lawsky’s
action. Yesterday (Tuesday), a solid source in New York throughout
the DSK case told me that there were “huge doubts about this case
in my circle. I doubt very much if Standard Chartered is completely
pure in all this, but there are all kinds of politics behind it –
foreignand domestic,
by the way”.
5.
SCB notes that ‘In January 2010, the Group voluntarily approached
all relevant US agencies, including the DFS, and informed them that
we had initiated a review of historical US dollar transactions and
their compliance with US sanctions…The Group waived its
attorney-client and work product privileges to ensure that all the US
agencies would receive all relevant information.’ This I know to be
an entirely accurate assertion. In fact, I am told that OFAC had the
same information flow as New York State, but did diddly-squat about
it for two years or so. Why?
6.
A trend is appearing over time in these suddenly emerging cases
(almost all of which involve British owned or HQ’d banks) that
suggests the Federal authorities
were telling the media that banks were cooperating when
they weren’t.
It isn’t rocket science from there to assume that the deals, fines
and plea bargains mélange was in operation: there must have been a
lot of “OK guys, we know – and you know that we know – so, we
can hit you hard, and save alot of money and be much more pleasant on
the pain issues…or we can hit you so hard that your heart will
stop. Whaddya think?”
A
City source this morning: “I think they [SCB] were caught napping
because the Feds had told them it was cool and then up pops some
bloke in New York and they weren’t expecting it”. Also confirmed
by this in the Reuters article: ‘Standard Chartered, which sought
the advice of one of New York’s top law firms, had hoped that
coming clean and turning over internal records to federal regulators
would yield a settlement, sources said.’
Fair
enough. But what was Lawsky’s motive for doing that?
7.
A West Coast US banking source insists that there was a leak from
Federal to New York State authorities: “No question in our minds
about that. Some spoiling tactics are in play here, and somebody
well-briefed in the Government wanted the truth out in the open.”
Why – bruised ethics? Or geopolitical pour
encourager les autres?
Possibly connected: the Reuters piece quotes ‘a Federal Reserve
spokesman’ as saying his employer ‘had been working closely with
various prosecutorial offices on matters involving Iran and other
sanctioned entities, but could not comment on ongoing
investigations.’
8.
It seems clear that some form of domestic internecine war is going on
about this in the US: one New York contact says that there is “the
odd Eliott Ness nut prepared to reveal sleaze at the federal level”.
For me, this is given added weight by the venom, and the detailed
examples of malfeasance, offered this time compared to, for example,
the Barclays case. Standard Chartered, for example, puts the all-up
total of Iran-related anti-sanction grubby stuff at less than $14
million. Lawsky says bollocks, it was $250 billion. That’s not
exactly a consensus of estimates.
So
there we have it: plenty of speculation and a reasonable amount of
logic behind it. Labour MP and anti-bank activist John Mann says, “I
think it’s a concerted effort that’s been organized at the top of
the U.S. government. This is Washington trying to win a commercial
battle to have trading from London shifted to New York.”
He
could be right: but it still doesn’t explain Lawsky’s pre-emptive
strike. However, I’ve been saying for months that the US financial
and political elites are looking for culprits and alibis for the
Tsunami of crap soon to descend on all of us. There is now
overwhelming evidence of attempts from Obama downwards to finger EU
sloth and British malpractice as the ‘root cause’ of America’s
‘torpedoed recovery’. It’s bollocks, but it will play well in
November. Reuters again:
‘A
British executive at an institution which ranks among Standard
Chartered’s top 25 shareholders also saw a politically motivated
move by U.S. officials irked by the major role London plays in the
global financial industry, attracting big investments from major U.S.
banks like JPMorgan Chase, Goldman Sachs and Morgan Stanley.
“Are
we starting to see an anti-London bias in U.S. regulatory
activities?” the executive asked. “Oh yes.” “Is there any
subtle form of banking sector protectionism going on?” “Yes.”‘
This
is yet another one to watch. Stay tuned.
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