Livening up the summer and continuing with the Bob Diamond approach, Standard Chartered has threatened to unleash hell on the “*******Americans”. Or one of their small, overzealous non-captured regulators to be precise.
In an interview to the FT, Peter Sands, CEO said that “…we were very surprised by the announcement…and we strongly reject both the position and the facts, the portrayal of the facts by the DFS. We differ on a range of matters of substance, fact and argument.” The surprise is fairly evident. However one eagerly awaits the rejection of facts and their portrayal. Specifically, the rebuttal of the following points from the DFS order which would showcase the Olympian legal and public relations skill possessed by the bank.
Paragraph 20 of the order:
As early as 1995, soon after President Clinton issued two Executive Orders announcing
U.S. economic sanctions against Iran, SCB’s
General Counsel embraced a framework for regulatory evasion. He strategized
with SCB’s regulatory compliance staff by advising that “if SCB London were to ignore OFACs regulations
AND SCB NY were not involved in any way & (2) had no knowledge of SCB
Londons [sic] activities & (3) could not be said to be in a position to
control SCB London, then IF OFAC discovered SCBLondons [sic] breach, there is
nothing they could do against SCB London, or more importantly against
SCBNY.” He also instructed that a
memorandum containing this plan was “highly confidential & MUST NOT be sent
to the US.”
This is apparently a direct quote from an email which goes on to say:
“when dealing with OFAC countries that are not on the
UK’s list SCB
London should use another US Dollar clearer in NY. It should not in any event
use .” SCB NY
“SCB should use eg [National Westminister Bank] who in processing the transactions would breach OFAC regulations & would expose themselves to a penalty.”
The facts are pretty well established. Maybe the fault is with their portrayal. DFS might have omitted the last line which stated “Just joking of course. This is what some evil bank would do but not us because we believe it is not just about what we do, but how we do it. (Great line, we should make it official).”
Paragraph 24 of the order:
In March 2001, SCB’s Group Legal Advisor counseled several of SCB’s officers that, “our payment instructions [for Iranian Clients] should not identify the client or the purpose of the payment.”
Again the facts seem irrefutable. Maybe the portrayal is again unfair and Standard Chartered is a victim of being selectively quoted. Maybe the Group Legal Advisor went on to state that “However we need to ascertain that the payment instructions are authorised and compliant with both the spirit and letter of the law because as you know we believe it is not just about what we do, but how we do it”.
Paragraph 45 of the order:
Having improperly gleaned insights into the regulators’ concerns and strategies for investigating U-Turn-related misconduct, SCB asked D&T to delete from its draft “independent” report any reference to certain types of payments that could ultimately reveal SCB’s Iranian U-Turn practices. In an email discussing D&T’s draft, a D&T partner admitted that “we agreed” to SCB’s request because “this is too much and too politically sensitive for both SCB and Deloitte. That is why I drafted the watered-down version.”
Memo from the ‘powers that be’ to all staff: Henceforth, email communication is banned. All messages will be sent on self-destructing papyrus. This message will self-destruct in 5 seconds.
Maybe DFS has the facts but is selectively displaying them. Maybe the “watering down” was in the national interest in conformance with the Patriot Act and others. The non-watered down version would have been damaging to the
not to Standard Chartered as DFS seems to be unjustly implying.
Paragraph 48 of the order:
In September 2006,
New York regulators
requested from SCB statistics on Iranian U-Turns, including the number and dollar
volume of such transactions for a 12 month period. In response, SCB searched
its records for 2005 and 2006, and uncovered 2,626 transactions totaling over
$16 billion. SCB’s Head of Compliance at the New York
branch provided the data to SCB’s CEO for the Americas,
who in turn, sent it to the SCB Group Executive Director in London. In his memorandum to the Executive Director, the CEO
expressed concern that this data would be the “wildcard entrant” in the ongoing
review of U-Turns by regulators and could lead to “catastrophic reputational
damage to the [bank].” Based on direction from “the powers that be,” SCB’s Head
of Compliance in New York
provided only four days of U-Turn data to regulators.
This seems to be based on employee interviews by the authorities. Standard procedure of refuting the facts and discrediting the employee can be followed. The memorandum is trickier to deny. Maybe the portrayal is unjust. The response to the memorandum which has not been revealed could have been “You are right. We must correct all failings at once and inform the regulators immediately because as you know we believe it is not just about what we do, but how we do it.”
Even though Standard Chartered have responded by swinging their fists wildly and loudly proclaiming their innocence, their defence seems to rest on legal technicalities than proof of appropriate behaviour. Moreover with their own staff warning about reputational damage if their actions regarding Iranian counterparties came to light countersuing when the actions have actually come to light requires some chutzpah. And a disregard for shareholder’s money.
This required a strategy of ‘Ok, you scored your political points now can we talk settlement away from the spotlight’ rather than the currently employed ‘FU. We’re Standard Chartered. How dare you?’ strategy.