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.