There's much debate this morning on whether US regulators are deliberately targeting UK banks. Much of that debate is jingoistic. John Mann, a Labour MP has said there is:
an increasing anti-British bias by US regulators and politicians aimed at shifting financial markets from London to New York
A great deal is along the lines of the Standard Chartered director who is quoted by the New York State Department as saying:
You fucking Americans. Who are you to tell us, the rest of the world, that we're not going to deal with Iranians
The sentiment in both cases is clear: it's that we're Brits and we'll decide what our banks do and don't do. And that mentality is fundamentally flawed for three reasons.
First, the alleged offences related to dollar trading. And that means the US is involved, like it or not. It has a right to decide how its currency may be used.
Second, Standard Chartered has a US banking operation. The US is completely entitled to decide that even if all the offences took place outside the US it does not want a branch of a bank not willing to comply with its law operating in its territory.
Third, in a globalised world it is ludicrous to suggest that the home regulator of a bank in the place in which it incorporated has sole right to determine responsibility for its actions. Do that and they'd all be registered in Sark (if that were possible) before the week was out.
Which brings me to the inevitable core of this problem, which is that the US is right in identifying the real issue at stake here, and that is the tax haven mentality of the City of London. Nick Shaxson has shown in his book, Treasure Islands, just how pernicious the culture of the City is. And let's not forget that the City is not just the Square Mile; it embraces the branch operations in all our tax havens like Jersey, Guernsey, the Isle of Man, Cayman, BVI, Bermuda and so on. These are an indivisible whole. The City and its branches have always acted together to work as secrecy jurisdictions.
In that context it's important to remember just what secrecy jurisdictions are. Secrecy jurisdictions are places that intentionally create regulation for the primary benefit and use of those not resident in their geographical domain. That regulation is designed to undermine the legislation or regulation of another jurisdiction. To facilitate its use secrecy jurisdictions also create a deliberate, legally backed veil of secrecy that ensures that those from outside the jurisdiction making use of its regulation cannot be identified to be doing so.
That's what London has done. Indeed, it's what I am sure it is still doing, just as we know that this is exactly what our dependencies and overseas territories do. What UK baks have set out to do is to create regulation that undermines that of other places. I hate to say it but the light touch regime of Gordon Brown and his predecessors (and successors, for Osborne is a man in Brown's mould) went and are going out of their way to facilitate this. The aim was and is, of course, to secure business. But the business was won by permitting trades not allowed elsewhere, and those trades were then hidden from view.
The US have rumbled this. A succession of regulatory and trading failures, all in London, have not happened by chance. They happened as a result of the weakness in design of the London regulatory environment. Standard Chartered will scream, but only, as looks likely, because they have been caught.
And what they've been caught at is ignoring the obligations of the states with whom they trade - the USA in this case. The director's comments, noted above, make that clear. The US has a law imposing sanctions on Iran. And Standard Chartered thought the US had no right to impose it on them even though they wanted to trade in dollars and in the US. Standard Chartered were wrong. The US did have that right. But in a globalised world were bankers want to make profit beyond regulation they want to ignore all duty to states, law and democratically approved processes that impede bankers getting richer at cost to the rest of us.
The mentality of Standard Chartered is a tax haven mentality. It is the mentality of turning a blind eye to the law of the state where you think you aren't, or which you think can't see you because you've put layers of secrecy between you and it. It's the same mentality that lets all banks run tax haven operations - all of which have the one single goal of challenging the democratically approved regulations, including tax laws, of major states.
And if we support Standard Chartered against the US what we are really saying is that these banks are beyond the law because they can then play one jurisdiction off against another and never be accountable anywhere for the crimes they facilitate - and I can say that whether or not Standard Chartered has broken US law (although it seems to have admitted it has). What that then says is we also do not have the right to tax either, because that automatically follows.
So John Mann and all those jingoistically attacking the US are wrong. Standard Chartered is subject to US law - and has to be. If we in the UK deny that then we are promoting the sort of abuse that tax havens are designed to facilitate. We shouldn't, because that tax haven mentality and regulation is destroying the fabric of our society. And if it takes the US to point that out and to defend democracy from that attack, on this occasion so be it. I'm no great fan of the US legal system, but sometimes you have to take support from whence it comes, and on this occasion the US right and the UK is profoundly in the wrong.
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RIchard
You are spot on re Standard Chartered’s entire arrogant and illegal behaviour, but isn’t it rather rich of the US to accuse the UK of turning a blind eye to the activities of its banks when the US allows all that unregulated and secret Delaware corporate activity to take place just a few miles from Washington and New York? Reeks of double standard on the US’s part.
To that extent, I agree
I hope my last line or so made clear my own disquiet
I absolutely agree with what you say.
There is, however, a very important further aspect.
And this is that, when it comes to matters of business, there is no jurisdiction that is more protective of its domestic corporations and citizens from the inconvenient legal systems of other countries and no country that is keener on extra-territorial extension of its law, yet more resistant to any moves in the opposite direction, than the USA.
Many US laws, and the application of them to foreign persons within their theoretical or actual scope are frankly outrageous.
US lawyers regulators, politicians and governments often appear to expect the entire world to operate for the prime benefit of US corporations, citizens and government.
That has to change.
I think we must be careful in allowing this sort of thought. If we follow this line then who are we to demand the Swiss, Jersey, Luxembourg, etc change their rules?
If it is ok for the US to enforce their own rules as they see fit, doesn’t that extend to other countries as well?
Very dangerous thinking…
I don’t follow ur logic
If we don;t agree with the US then we have no right to demand others follow the rules
Is that what you’re saying?
I hope so
It seems to me that you are saying we should respect the laws of the US even though we may not agree with them.
And it seems that Green New Deal Yes it saying that this is a dangerous thing to state, because then where would we stand when disagreeing with the tax laws of Switzerland (for example).
The tax laws of the US applied to Standard Chartered: it was trading there
The tax laws of Switzerland have been designed to assist people who are not there
A very big difference
Sure, but where do you draw the line at respecting the laws of another nation and disregarding them? Some might feel that the Iranian people suffer far more from the US sanctions than UK citizens from the Swiss laws on banking secrecy.
We’re not ignoring Swiss laws in secrecy
We’re demanding they don’t undermine our laws on tax declaration
but it undermines our collective effort for change. JJ says it better than i, where do we draw the line on respecting another country’s law/regulatory system?
if we follow this thinking, who are we to demand the Swiss change their own laws which they are comfortable with having?
this is quite concerning
You are both following a corrupted line of ethical thinking
The US is regulating its own banking sector – of which Standard Chartered were a part
Switzerland et al are seeking to undermine other countries regulation and in the process are supporting crime – something fundamentally different and presenting no ethical dilemma at all
Of course the two claims are not at all mutually exclusive. This bank might be both corrupt as all hell and simultaneously be victimised by Wall Street/DC-types who are after their business.
However I, for one, grew out of the ‘everyone else was doing it!’ or ‘teacher is picking on me!’ excuses when I was about 5 years old.
It’s amazing how much bank fraud apologists react like spoiled children when confronted with their wrongdoing. It’s like they’ve never been told ‘no’ before and simply cannot process that information. They seemingly cannot even compute the notion that something might actually be their own fault (or that of those they worship).
Doubtless it’s easier for US regulators to crack down on non-US banks but two wrongs still don’t make a right. The inability of anyone to take responsibility for anything continues to astound me.
Your second sentence sums up this issue perfectly. That is exactly what is happening here.
Well said Richard. I too am not a great fan of many aspects of the US. But, as Philip says “two wrongs don’t make a right”.
But I am surprised to learn that “Standard Chartered has a US baking operation” ! What do they bake there – dough-nuts I guess (pun intended) – or maybe fairy cakes?
Will change!
The deal under Bliar/Brown/Balls was in two parts.
The first was that London would be given and accept a regulatory framework similar to that which applied to the US and other major financial centres. The second part was that the politicians would ensure that the framework wasn’t enforced, thereby giving London a tactical advantage over its competitors.
Thank goodness for those US regulators who have had the courage to take this on and expose it.
Shame on Mann. Have you seen his wiki entry – interesting for what it says and even more interesting for what it doesn’t say.
Would that be the framework that caused the financial crisis in the first place?
Interesting to hear on the radio this morning that the last two heads of the NY Regulators has gone on to be Govenor of NY, and that position is coming up again quite soon. Political posturing? Very likely, as even the US Treasury are trying to shut the NY Regulators up!!!
Or maybe just SCB are guilty – as they have accepted to be true
John Mann MP is a pretty obscure individual, but I think he is a Blairite ultra and so, no doubt, a straightforward shill for City lobbyists.