Building a Universal Regime: the Chartered Mess Is More of the Same

by Nigel Bolton-Shaw on August 15, 2012

Standard Chartered has just agreed to settle Iranian money laundering charges with the US even though the bank isn’t fully based in the US and strongly denied the allegations – at least initially.

It didn’t take long before the bank’s officials came to their senses and decided to settle, given the overwhelming regulator pressure that could have been applied. No doubt we’ll see more of this in the 21st century. It’s part of a trend.

Let’s back up momentarily and look at this from a historical perspective. There is no doubt a faction of the regulatory and banking community are trying to globalize Western finance.

This is not the stuff of tin foil hats but a deadly serious commercial trend of import to investors and businesspeople alike.

There is of course John Perkins famous book, “Confessions of an Economic Hit Man.” Perkins who worked for the US National Security Agency (NSA) famously explained what he considered to be the mandate of both the International Monetary Fund and the World Bank.

The World Bank, we learned, lent to banana republics mostly. Then, when the money was predictably lost or stolen, the IMF was called in to privatize assets and otherwise ensure that World Bank funds could be regained.

In this way whole countries became part of a larger Western sphere of influence. Multinationals owned great asset swaths and the country’s political establishment was firmly wedded to larger Anglo business and economic facilities.

More recently Anglo regulatory and taxing authorities are positioning themselves worldwide in concert with policing authorities like the FBI – now in some 90 countries.

The FBI was a domestic US facility and its overseas’ expansion is extra-constitutional. But this has not stood in its way. US and British taxing authorities now claim the power to tax citizen assets anywhere in the world.

It is a growing effort. BRIC countries, especially China, are expanding their sphere of influence as well from an economic and currency standpoint.

European countries, needing cash are becoming part of the trend, too, as David Galland points out in ‘Bypassing Government Roadblocks to Your Personal Prosperity

Most of the time when we think about raising taxes, it’s the threat of millionaires leaving. We don’t usually think about them not coming to a country. Here’s an interesting case of Zlatan Ibrahimovic signing a soccer contract for 14 million euros per year. If the new tax goes through in France, he will be taxed for 75% over the first million euros.

If the tax does go through, good luck attracting multimillion-earning players to France. A lot of people in the 99% will be pretty unhappy when all of their sports teams become horrible as a result of the tax.”

The regulatory and bureaucratic impulse of the 20th and 21st century is toward bigness – and further intrusiveness. It is important to understand this trend if one is to understand the world today from a realistic investment and professional point of view.

Back to Standard Chartered. A UK Telegraph article serves as a good jumping-off point. Here’s how it begins:

Standard Chartered agreed to pay a $340m (£217m) fine on Tuesday in a humbling settlement with a United States regulator over Iranian money-laundering charges.

The British bank was forced to capitulate, also agreeing to a money-laundering monitor, after a week’s stand-off with the New York State Department of Financial Services (DFS), just hours before it faced a public hearing.

In the settlement, the bank admitted the value of transactions at fault amounted to “at least $250bn”, not $14m as it had said. Last week the New York financial regulator claimed that the “flagrantly deceptive actions” by the British bank had left the US “vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes”. The charges wiped more than 20pc off the bank’s share price in 24 hours.

The agreement is only with the DFS in New York and is not the co-ordinated settlement with all US regulators the bank had hoped for. “We will continue to work with our federal and state partners on this matter,” the DFS said.

Standard Chartered has agreed to an extraordinary level of supervision by the DFS to salvage its Wall Street bank licence and avert a public showdown over its Iranian operations.

“The bank shall install a monitor for a term of at least two years who will report directly to the DFS and who will evaluate the money-laundering risk controls in the New York branch and implementation of appropriate corrective measures,” said the DFS in a statement. “In addition, DFS examiners shall be placed on site at the bank.”

You see? Because Chartered had US exposure and didn’t want to lose its Wall Street licence, those in charge of Chartered eventually saw no upside in fighting the charges.

Much as taxing and policing authorities are becoming more invasive globally, so regulatory/civil authorities are as well. The Megaupload Internet sharing empire of Kim Dotcom was taken down by American copyright enforcers projecting FBI agents halfway around the world to New Zealand.

We’ve covered that incident in these pages and pointed out that as invasive as some of these tactics are, it is too early to say how effective they will be. The search warrant that the authorities used to enter Dotcom’s mansion was recently ruled illegal and there is certainly a chance the entire extradition procedure may collapse.

But whether it does or not, it is nonetheless obvious we’re entering a new era where the projection of regulatory, economic and even military power (via the UN’s 2005 “responsibility to protect” mandate) are becoming more evident and intrusive.

People who do not take this into account, especially when contemplating international transactions, do so at their own peril.


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