Mafia extortion or double standard?

PUBLISHED : Friday, 07 December, 2012, 12:00am
UPDATED : Friday, 07 December, 2012, 4:14am

The American extortion of Standard Chartered is nearly over. The British bank is ready to pay off, sorry I mean settle with, the rest of the US mafia crew otherwise known as federal regulators, with a fine of US$330 million for breaching US sanctions against Iran. New York State's top financial regulator, Benjamin Lawsky, first broke ranks by making incendiary money-laundering and conspiracy accusations against the bank worthy of Tom Clancy.

That forced StanChart to cough up US$340 million, never mind the fact Lawsky might make a better spy novelist than a fair-minded prosecutor. The more senior dons were upset that Lawsky, a publicity-hungry and politically ambitious upstart - the state's first superintendent of financial services - got the first bite of the cherry. That's not how it's traditionally done - he wasn't showing any respect, acting before the other godfathers were ready to make a move. Now they have demanded a comparable sum, for reason of face as much as anything, for the same "offences"; and StanChart can do little but comply. There is no such thing as double jeopardy when it comes to a financial penalty.

The US, you see, effectively claims jurisdiction over foreign financial institutions with a US address. Given the dominant US position in the world financial system, it's pretty hard to avoid a presence there. This means foreign financial institutions and investors are liable even if their transactions are merely routed through the US while their origin and destination are overseas and the clients reside outside the US. That apparently is what got StanChart into trouble for transactions it did for Iran over a decade. You may have no beef with Iran, but you still have to follow US sanctions.

The US is tough on foreigners, but it is anything but with its own companies. In the past decade, the US Treasury Department granted exemptions to almost 4,000 US companies to do business worth billions of dollars with countries under sanctions, such as Iran, Sudan and Cuba. And, depending on the outcome of a court appeal next year by Ross Mandell, the self-styled "bad boy of Wall Street", it may become legal for Americans to cheat foreign investors so long as the securities involved are traded overseas. That will be some double standard.