Counterparties: “You f—ing Americans. Who are you to tell us that we’re not going to deal with Iranians.”

By Peter Rudegeair
August 6, 2012

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Just over a month ago, Standard Chartered’s CEO urged bankers to regain their “social legitimacy” and asserted that “good banking is never needed more than now”. That message was in line with the bank’s image as “boring but good“, as one FT headline put it.

Standard Chartered now stands accused of helping Iranian banks – including the central bank – circumvent US sanctions by concealing roughly 60,000 transactions involving at least $250 billion from US regulators, and having reaped “hundreds of millions of dollars in fees” for itself over a decade. The whole damning complaint is here, and Business Insider pulled the choicest bits here.

In this section, a StanChart Group Executive Director provides a great example of banker braggadocio, now destined to rank among the industry’s all-time PR lows:

In short, SCB [Standard Chartered Bank] operated as a rogue institution. By 2006, even the New York branch was acutely concerned about the bank’s Iran dollar-clearing program. In October 2006, SCB’s CEO for the Americas sent a panicked message to the Group Executive Director in London. “Firstly,” he wrote, “we believe [the Iranian business] needs urgent reviewing at the Group level to evaluate if its returns and strategic benefits are … still commensurate with the potential to cause very serious or even catastrophic reputational damage to the Group.” His plea to the home office continued: “[s]econdly, there is equally importantly potential of risk of subjecting management in US and London (e.g. you and I) and elsewhere to personal reputational damages and/or serious criminal liability.”

Lest there be any doubt, SCB’s obvious contempt for U.S. banking regulations was succinctly and unambiguously communicated by SCB’s Group Executive Director in response. As quoted by an SCB New York branch officer, the Group Director caustically replied: “You f—ing Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians.”

The complaint also alleges that Deloitte & Touche aided StanChart, saying the consultancy “intentionally omitted critical information in its ‘independent report’ to regulators”. And a footnote reveals further investigations into whether StanChart was involved in similar schemes with other countries under US sanctions, such as Libya, Myanmar and Sudan.

If nothing else, perhaps this episode will make bank executives think twice before signing off on sanctimonious ad campaigns while they’re allegedly simultaneously leaving the “US financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes”. The voice-over from this 2010 Standard Chartered commercial has now been pushed painfully beyond absurdity:

Can a bank really stand for something?
Can it balance its ambition with its conscience?
To do what it must. Not what it can.
As not everything in life that counts can be counted.
Can it look not only at the profit it makes but how it makes that profit?
And stand beside people, not above them.
Where every solution depends on each person.
Simply by doing good, can a bank in fact be great?
In the many places we call home, our purpose remains the same.
To be here for people. Here for progress. Here for the long run.
Here for good.

– Peter Rudegeair

On to today’s links:

Good Points
Should hospitals be more like the Cheesecake Factory? – New Yorker

Knightmare
Knight Capital raises $400 million in preferred shares, convertible into a 70% stake in the company – CNBC

Old Normal
Lack of copyright may have powered Germany’s 19th-century industrialization – Der Spiegel

Contrarian
Study finds that the revolving door actually toughens enforcement results at the SEC – NYT and American Accounting Association

EU Mess
Spain’s prime minister would ask for an economy-wide bailout, but first the ECB has to let him know what he’d be asking for – WSJ
Consumer austerity hits Europe: Even the French aren’t going to Disneyland Paris – WSJ

Politicking
After Bain made $1 billion there, Mitt Romney isn’t too popular in Italy – Bloomberg

LIEBOR
To minimize settlements, banks compete to show regulators they’re “not as bad as the next guy” – Dealbook

China
Golden Elephant No. 38, yielding 7.2% annually, “not fundamentally different from a Ponzi scheme” – Reuters

Love Equity, Hate Disclosure
Little known, marginally successful Manchester United to use start-up disclosure exemptions in IPO – ESPN

Oxpeckers
Time Warner buys Bleacher Report for less than $200 million – Bloomberg

Stuff We’re Not Linking To
Trend: increased Botox use on Wall St – Bloomberg TV

 

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Comments
40 comments so far

Wait wait wait, what’s the answer Why is it OK for the US to unilaterally declare that people all across the world cannot do business with Iran? Why are we taking State Department press releases as the morla arbiters here?

Isn’t it at least worth contemplating the possibility that *not* acting as an adjunct to US gunboat diplomacy is actually the more “socially legitimate” course here?

Posted by JW_Mason | Report as abusive

I haven’t read the article on the Cheesecake Factory (I plan to this week), but I find the question ironic, seeing how it’s places like the Cheesecake Factory that keep hospitals in business.

Posted by KenG_CA | Report as abusive

The banking sanctions against Iran are fatuous in any case. They were implemented to block the creation of an oil bourse operating in Euros and as a sop to Israel to prevent that country from starting a war. The myth of Iran nuclear weapons has been used for over a decade to distract the world from the continued theft of land in Palestine by Israel…and the scaremongering is on the two year loop aligned to the US electoral cycle. We are not in iteration 7. Enough is enough. Well done Standard Charter for not playing along…..until now.

Posted by Linuxluver | Report as abusive

“Wait wait wait, what’s the answer Why is it OK for the US to unilaterally declare that people all across the world cannot do business with Iran? Why are we taking State Department press releases as the morla arbiters here?”

The way the sanctions work is basically this: foreign financial institutions that provide financial services to certain named entities in Iran and the Iranian Government risk their access to the U.S. financial system. Treasury can block / impose conditions on the opening and maintaining of correspondent accounts and the like. U.S.-based firms are subject directly to fines and penalties and U.S. citizens are individually liable for both civil and criminal penalties no matter who they work for.

So the U.S. is saying to foreign banks: do what you like, but if we can prove it, we can cut you off from U.S. market. Pretty effective stick, I’d guess. It’s not a universal right to have access to our financial markets.

Posted by sue_j | Report as abusive

“Wait wait wait, what’s the answer Why is it OK for the US to unilaterally declare that people all across the world cannot do business with Iran? Why are we taking State Department press releases as the morla arbiters here?”

The way the Iran sanctions basically work is this: a foreign financial institution providing financial services to certain named entities in Iran including the Iranian government risks losing access to U.S. financial markets. Treasury can prohibit or place conditions on the creation / maintaining of correspondent accounts and the like in the U.S. U.S.-based firms are subject directly to fines and penalties and U.S. citizens are personally liable for both civil and criminal penalties if they are involved in any such transaction, no matter who they work for.

So basically the Treasury is saying to foreign banks: do what you like, but know that we can cut you off from our markets. Pretty persuasive stick, I’d guess. Access to U.S. markets is not a universal right.

Posted by sue_j | Report as abusive

(Sorry for the double post – the delay threw me off)

Posted by sue_j | Report as abusive

The cleverly divised monetary system of USD, Euro, Pounds deprives the lesser currencies to thrive in a so call free market. All L/C’s and and overseas buyers documents are in US$, so in short USA have us all by our scrotums.
Unless we fall back on the old batering system which is now being done effectively by Iran and India.

Posted by politicaljunkie | Report as abusive

The Group director in London makes a good point.

All the time the US is funding the terrorist state of Israel – a major cause of the whole Middle Eastern conflict and the conflict with Iran.

Posted by SteveSYDNEY | Report as abusive

Successive US Administrations should not underestimate the undercurrents their actions in imposing their laws on the rest of the world creates in the rest of the world, especially when the US also refuses to abide by the International Criminal Court, doesn’t join in on Climate Change, engages in one sided extradition treaties and often acts as a hypocrite in certain parts of the world.

As for the point above about Iran selling oil in Euros, isn’t that and Iraq’s Saddam moving in the same direction reasons for US intervention in those countries, never mind the Middle East situation? Imagine how much lower the USD would be if it was not the world’s reserve currency. That could also partly explain the incessant attacks on the Euro that began way back in 2004 or so… all in the aim of destabilisation to support a double deficit currency.

What next, attack institutions for dealing with Cuba? Why not? Most of Europe has done that for decades, and China too (which also has poor human rights). Maybe the US should ban US companies from dealing with Europe and China as well? What about human and women’s rights in Saudi Arabia, the country that incubated Al Qaeda? Oh right, profits and oil count more than principles.

None of the above means I do not share many of the goals the US has, but sometimes taking a long hard look in the mirror is worthwhile, especially if you want other people to do what you want. Persuasion is more powerful than coercion. With the rise of the BRICS, this is an area the West ignores to its disadvantage.

Posted by FifthDecade | Report as abusive

Successive US Administrations should not underestimate the undercurrents their actions in imposing their laws on the rest of the world creates in the rest of the world, especially when the US also refuses to abide by the International Criminal Court, doesn’t join in on Climate Change, engages in one sided extradition treaties and often acts as a hypocrite in certain parts of the world.

As for the point above about Iran selling oil in Euros, isn’t that and Iraq’s Saddam moving in the same direction reasons for US intervention in those countries, never mind the Middle East situation? Imagine how much lower the USD would be if it was not the world’s reserve currency. That could also partly explain the incessant attacks on the Euro that began way back in 2004 or so… all in the aim of destabilisation to support a double deficit currency.

What next, attack institutions for dealing with Cuba? Why not? Most of Europe has done that for decades, and China too (which also has poor human rights). Maybe the US should ban US companies from dealing with Europe and China as well? What about human and women’s rights in Saudi Arabia, the country that incubated Al Qaeda? Oh right, profits and oil count more than principles.

None of the above means I do not share many of the goals the US has, but sometimes taking a long hard look in the mirror is worthwhile, especially if you want other people to do what you want. Persuasion is more powerful than coercion. With the rise of the BRICS, this is an area the West ignores to its disadvantage.

Posted by FifthDecade | Report as abusive

“Access to U.S. markets is not a universal right”. Edo, 1853: quod licet iovi, non licet bovi.

Posted by vilfredo | Report as abusive

@KenG, your valid point notwithstanding, the Cheesecake Factory article is quite good, and you should read it when you get the chance. The thesis is that for our healthcare system to become both better and more cost-effective, it must reduce the ability of healthcare professionals to act with their own biases, and instead standard best practices need to be defined and to some extent enforced.

I’ve been an outpatient for a couple of procedures, and I get bills from people I had no idea were involved in the process, and couldn’t figure out their involvement. I swear that there is a desk in the hospital with a stack of patient folders awaiting billing and a sign exhorting providers to take one at random and send a bill.

Posted by Curmudgeon | Report as abusive

While I wouldn’t employ the expletive, I have the same exact question.

And I’m an American, born and raised.

Posted by MC1171611 | Report as abusive

Linuxluver wrote: “The myth of Iran nuclear weapons”

What a bizarre comment from someone who “luvs” Linux! Google on “stuxnet centrifuge” and “iran north korea nuclear weapons” and get back to us.

Posted by baroque-quest | Report as abusive

Of course much of the world, even if it is discreet about it, thinks the US vendetta vs Iran re its assumed nukes is stupid and merely a manifestation of the power of the Israel Lobby in the US. Without Israel beating the war drums, there would be no sanctions on Iran.

Posted by Chris08 | Report as abusive

Either you do business with the mullahs, or you do business with US. Period.

Posted by reality-again | Report as abusive

$250B, that is quite an impressive amount, 1/4 of Iran GDP. I wonder how long that took SC bank?

Absolutely right Paintcan, on the drive of our Administration for world hegemony, quite the opposite of democracy: the US with sole veto power! And, the Iran sanctions are one of clearest demonstrations of the US drive to un-democratize the world: if Iranians don’t make their country act the way the US wants, they will be starved.

Posted by xcanada2 | Report as abusive

“You f—ing banksters. Who are you to tell us that you think your above govts foreign policy decisions and the law of the lands in which you milk?”

You wanna be Taliban,(?)then your gonna get treated like Taliban!

Posted by Raymond.Vermont | Report as abusive

Rub-a-Dub-Dub Three banksters in Jug…

Where they gonna be hiding the soap?

All the Bentley key fobs in the world, aint gonna be of much use at all where some of them are going!

Posted by Raymond.Vermont | Report as abusive

@RayV – you’d think so, wouldn’t you? But look at HSBC – they are being allowed to get away with murder – literally, they were full-fledged parties to the act of international drug trafficking. Criminal liability for every drug-dead-body involved is on them as much as it is on the guys who pulled the triggers. But it’s a taboo subject here. Go figure.

Posted by MrRFox | Report as abusive

@Ken_G and Curmudgeon – I’ll submit that a primary root cause – possibly the primary root cause – of the differences between healthcare and the Cheesecake Factory is that any customer of the Cheesecake Factory knows upfront what they will be charged and pays out of their own pocket. Between opaque pricing and third-party payment, most of the healthcare system has become divorced from market discipline.

(I’ll expand on that with the point – which I’ve made here several times before – that health insurance has some component of “insurance” – protection against large, catastrophic costs – but much of what health insurance does is just a tax-advantaged third-party payment mechanism.)

Posted by realist50 | Report as abusive

@realist50, you may be right (although I’ll reiterate that the article makes a good argument). Any idea how to obtain market discipline here? A while back someone (possibly TFF) made a comparison between healthcare and higher education pricing that’s looking more valid as time goes on.

Posted by Curmudgeon | Report as abusive

Payment, but also negotiation. As best I can tell, my insurance pays less than half the “list price” of the services provided.

Posted by TFF | Report as abusive

Get real guys. The strong rule the world, and they always have. Whether or not you feel that arrangement is fair and equitable, is immaterial. It is a fact that is not going to change in our lifetime.

As bad as “we Fu–ing Americans” are, we are a whole lot better, kinder, gentler and more benevolent than Russia or China will be if they ever get the opportunity TO RIDE YOUR HORSE . . . Think about it for a while before you answer.

Posted by JamVee | Report as abusive

@JamVee:

Any brainwashed citizen of any world empire would say the same thing.

Posted by xcanada2 | Report as abusive

realist, I’d agree that the healthcare system has been divorced from market discipline, for the very reasons you mention. Also, insurers are not driven by insuring the healthiest clients, but rather by maximizing their bottom line. There is nothing wrong with a company that seeks to increase their profits, but insurance companies usually attempt to do this by minimizing claims (i.e., rejecting them) and avoiding higher risk clients. That does nothing to improve health care, and also distorts the true pricing.

Curmudgeon, since you asked for an idea how to obtain market discipline, I will give you mine. Instead of insurance that pays your medical bills, the government should offer a guaranteed medical loan for whatever health issue you need to resolve. You will have to pay back this loan, for the rest of your life, if necessary, but you will always be sure it’s available. However, you will have incentive to keep costs down, as you are ultimately responsible for paying them. I can go into more detail about how this would work, but the goal is to shorten the feedback path between consumer and provider, a path that is totally distorted.

I’m still going to read the article, I have a long flight coming up this weekend.

Posted by KenG_CA | Report as abusive

How about those f—ing Americans telling the f—ing British banks what to do with the f—ing Iranian money ?

Posted by whyknot | Report as abusive

We have to go to war with Iran. We must sanction them. Any country, bank, or company that is not with us is with the terrorists! We must invade Iran, immediately. Don’t worry, oil will pay for everything and they will throw flowers at our troops feet!!!

We must protect Isreal at all costs. They are a beacon of democracy. They are the only country in the world to treat all of their people (Jewish and Muslim) fairly and equally. They are the ONLY country that gives all there people rights to housing, worship and a decent education. They do not go after nuclear weapons like that dirty terrorist country Iran. We must protect Isreal at all costs!!!

HAHAHAHAHAHA!!!!!!

Posted by KyleDexter | Report as abusive

This “article” only highlights the old proverb: “those who forget the past are condemned to repeat it.”

These same people are the ones who in the 1930s said “who are you to tell us not to deal with Nazi Germany?”

Posted by HAL.9000 | Report as abusive

“As quoted by an SCB New York branch officer, the Group Director caustically replied: ‘You f—ing Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians.’”

All of this involves transactions cleared through U.S.-regulated banks. Therefore, the issue is not whether the U.S. can tell foreign banks or people in foreign countries not to deal with Iranians. Instead, the issue is whether the U.S. can tell foreign banks and people in foreign countries not to deal with Iranians through U.S.-regulated banks. I’m sure that the Group Director of Standard Chartered Bank believes the U.K. can tell foreign banks and people in foreign countries with whom they can deal through U.K.-regulated banks. It’s part of the basic concept of regulating banks — saying what may and may not be done through the banks. If Standard Chartered Bank doesn’t want to be affected by U.S. bank regulations, they should stop doing any business that involves transactions cleared through U.S. banks.

Posted by Bob9999 | Report as abusive

“Payment, but also negotiation. As best I can tell, my insurance pays less than half the “list price” of the services provided.”

What do you do if you are a healthcare provider making 30% profit and big insurance company comes along and demands a 50% discount on the prices? Simple – you increase the price list… and the people without insurance get shafted.

Posted by Solli | Report as abusive

Just wait, you’ll have your answer!

Posted by ElDough | Report as abusive

The World really needs an completely alternative financial system the Americans cannot manipulate for their dubious political purposes. This nonsense like FACTA is getting more and more ridiculous.

Posted by rsattahip | Report as abusive

“The voice-over from this 2010 Standard Chartered commercial has now been pushed painfully beyond absurdity:”

Mr. Rudegeair: The SCB statement this quote refers to is not absurd if you’re not American. The publicly stated US gov’t objective of “Full Spectrum Dominance” is repulsive, abhorrent, and unacceptable to 99% of the non-American world. We Americans ignore this reality at our gravest risk. We’re alienating ourselves from the rest of the world at an astonishing pace. The daily news headlines describe the backfire.

Posted by sarkozyrocks | Report as abusive

FELIX, you would do wonders for your readers if you didn’t post obtuse links to ‘now stands accused’ and ‘whole damning complaint is here’ so we knew WTF your post is about.

It’s a blog but really, come on, do us a favor. This is like reading about the score but not being sure of which teams were even playing. DORK.

Posted by Mac20nine | Report as abusive

Where is my comment

Posted by winfrey50 | Report as abusive

Why would you do business with Iran? Why would you work for a known murderer or a known perpetrator of tax fraud? It only makes you as guilty, an accessory to the crime.

Posted by SixthRomeo | Report as abusive

Let’s see, what does this tell us about those moralistic bankers, eh? We’d like to do business with a country that brutalizes women and keeps them down. We’d like to do business with a country that wishes to annihilate another country that does NOT wish to annihilate them. We’d like to do business with a country that has no hesitation on killing another person if they don’t profess a belief to some prophet.

Yeah. Priorities much?

Posted by MarkGordon | Report as abusive

“Fucking Americans” is an oxymoron and therefore literately inappropriate….

Posted by Mister_Mister | Report as abusive

Pox Americana and its delusional messiah complex is the greatest threat to global stability.

Posted by ToshiroMifune | Report as abusive
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