Banks, eh? On the British left, we’re often so busy disliking them in general that we don’t always take the time to differentiate between their misdemeanours.
While we’ve been exercising ourselves greatly about irresponsible bankers who have largely been operating within the rules – and where arguably we ought to be looking first to governments, for not having done their jobs in regulating them properly – we miss something else.
And so, much less attention has gone, until recently, on a much more serious problem: those who actively flout the rules. In particular, the illegal transfer and laundering of money.
On Monday the stock of Standard Chartered Bank (SCB), one of Britain’s oldest banking institutions, dive-bombed as it was accused of sanctions-busting with Iran. Accused, because the bank currently denies this. We shall see. If true, it is a sad and ironic tale, which I can perhaps help explain, because I used to work there.
SCB has been, in fact, a real British success story, formed from the merger of two old colonial banks in 1969, although its success was largely due to seeking its fortune in Asia. Although not so well-known to the British public, in Hong Kong and Singapore it is as much a high-street bank as NatWest is in the UK. And although it still keeps its legal HQ in London for regulatory – and perhaps historic – reasons, its real revenue and headcount is in these Asian hubs, as well as, more recently, China and India.
It’s an interesting place to work, because it has a culture which is international, and yet unlike many multi-nationals, not particularly American (its New York branch is actually quite small). Indeed, although it has modernised, and “Asianised”, its corporate culture since the stuffy 1960s, it might also be viewed as a microcosm of what multinationals might look like, had the sun not set on the British Empire during the 20th century: a British-Asian fusion, a latter-day East India Company.
For all these reasons, it surprises me not a jot that one of its British execs might utter the words “You f—ing Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians?”
But back to the story. SCB has, according to the New York regulator, deliberately done billions of dollars’ worth of trades with Iran, in contravention of the US embargo, and then covered their tracks. Not to mention a few other embargoed countries along the way. According to these claims, they even proceduralised it: a procedure called “Quality Operating Procedure Iranian Bank Processing” which told employees how to strip the giveaway detail off the SWIFT payment instructions, so no-one would know where they came from. While there’s some hyperbole in the wording, it’s a pretty detailed charge sheet.
Now, while we may debate whether or not sanctions are the best course of action to take with Iran, or whether the US is deliberately scaremongering about the country, as Jon Snow yesterday tweeted yesterday (that may be true, but it’s not clear there’s any connection to SCB), behaviour such as that alleged is clearly reprehensible under any circumstances.
And, if the regulators are right, what seems very likely is that money from at least some of these transactions over the years will have been used to fund some kind of terrorism.
And so there would be a cruel irony in all of this: SCB New York should be the last place on earth to be hindering the fight against terrorism. I know, because when I was running a project there in 2002, staff were still working out of their disaster recovery site in New Jersey. Yes, SCB New York had previously been located in No. 7, World Trade Center, until it collapsed on September 11, 2001.
As it was, all the staff, miraculously, escaped. But eleven years later, a few of their successors, perhaps in many cases unwittingly, may just have been aiding similar terrorists, somewhere in the world.
But this is still unproven: in the strange tale of Standard Chartered, two things are for sure.
One, that embargoes and money-laundering rules exist for very good reasons, not just for hurting Iran, and they must be stuck to.
Two, that SCB stands accused of breaking the rules regularly and deliberately over a long period, and it is not the first major bank, either. The problem is not under-regulation: it is deliberate, systematic circumvention of existing ones.
Whether or not SCB is found guilty of the charges levelled by the New York regulators, you have only to look at HSBC to see that such things go on. To be fair, governments have been trying hard to clean up banks since 9/11; but that was eleven years ago, and banks have been dealing in offshore locations and unnamed accounts for many decades before that. Self-evidently, it takes more than eleven years to change a culture.
But it really is about time we saw banks through better-fitting glasses. On the one hand, we need banks and they do a necessary job. Let’s not constantly beat them up for doing things which are legal – even if this means being overpaid, making money from speculation or selling risky products. Instead, let’s regulate them better, to make sure that these things are properly controlled.
But let’s beat them up, heavily and often, about things which really matter. Banks are still involved in money-laundering, illegal transfers and similar activities. Such things matter because they fund drug cartels, various types of mafia around the world and al-qaeda.
These things, not the pursuit of profit within the rules, are the true banking evils of the 21st century, an era when terror can be funded in the blink of an eye through an electronic SWIFT payment.
It is getting these things right which will have a much greater effect on people’s lives across the world than our rich-country views on whether we personally like banking as a business or not.
Please, let’s remember that next time we talk about “producers” and “predators”.