And now comes news about the US authorities cracking down on Standard Chartered for allegedly side-stepping rules that prohibited dollar dealings with Iran or Iranian entities. The crack-down on StanChart raises many questions, leaves many issues unanswered.
For one, as already mentioned in the first instalment of this series, this recent development involving StanChart could be another example of the lax rules that get built into an off-shore risk and compliance centre. The reason for building a global risk and compliance centre in India is to primarily save costs, and not to tap into the fabled Indian talent pool. So, it could be India today and god-knows-where tomorrow.
However, as more news of the StanChart saga emerges, it seems there’s more to it than meets the eye. Here are some conjectures.
1. This is another example of bullying and interference that has gained US so much notoriety over the past one century. It’s the with-me-or-against-me syndrome. In fact, when StanC’s US director warned the London office about the regulatory risks involved in dealing with Iran, one senior chap went apoplectic. You can read his outburst here, though there is no confirmation whether this really was the guy or not.
2. This is eager beaver Benjamin Lawsky trying to prove his credentials. He is Superintendent of the New York State Department of Financial Services, an office that has been created recently and he wants to demonstrate that he has what it takes. Read his profile here.
3. There is a suspicion that all this could part of an orchestrated political manoeuvre, with an eye to the upcoming presidential elections a few months later. Democrat nominee Barack Obama has been vocal about jobs being “exported” to India; and now, in a remarkable coincidence, you have examples of offshore centres in India coming across as fast and loose with rules, or lax and plaint. But, as I said earlier, this is just a coincidence, random speculation and there’s nothing to prove the claim.
4. It could also be a fall-out of USA vs Britain. According to The Economist, British politicians are “…accusing US regulators of pursuing an anti-London agenda following recent investigations into HSBC and Barclays.” Read The Economist story here.
5. Finally, the root of the problem is the dollar’s status as reserve currency. As long as that is reality, dollar transaction will need to get cleared in New York and thus will come under the regulatory glare of the US authorities. Iran had once proposed that it wanted to shift its international payments system to the euro. But, given the state of the euro and widespread apprehensions of its imminent collapse, the dollar remains the default reserve currency. Time for the yuan to stand up?