Wednesday, August 8, 2012

US law should stop at its borders

I recommend that Benjamin Lawski, head of New York state's Department of Financial Services takes my good friend Sriram's  Geography 101 course . He might want to learn where the borders of the United States lie and where his jurisdiction is. The laws of the United States are enforceable in the United States. They are not enforceable on the world.

I am referring to the spat between the DFS and Standard Chartered Bank. The problem is this. US law does not allow US entities to have any business dealings with Iran - neither the country nor its nationals. The US is perfectly entitled to have such a law - its merits or otherwise is for US citizens to decide. The problem is that the US would like everybody in the world to follow that law. That deserves the response - mind your own business.

Standard Chartered Bank is a UK headquartered bank that largely deals with Asia and Africa. It has very little business in the US. However it does have a branch in New York where transactions are routed through if they are in US dollars - since most Asian and African countries deal in US dollars for their international trade, much of it gets routed through the US.

There is no doubt that Standard Chartered Bank deals with Iran. But the laws of the UK where it is registered and the other countries where it operates, does not prohibit it from doing so. There are certainly laws  prohibiting dealings with crooks and terrorists, but it is a reasonable fact (that may however be surprising to Mr Lawski) that all Iranians are not crooks or terrorists. US law  permitted in the past  the sort of transactions that Standard Chartered did, called U turn, but there are grey areas and , no doubt, this case will be enmeshed in legalese.

But the impact of the DFS report has been devastating on Standard Chartered Bank. The damage has been done, irrespective of whether the bank is found guilty or not. It's share price tanked some 16% yesterday. 

Standard Chartered is livid and has said it would vigorously contest the case (code for saying screw you). It is asking the British government to intervene and put the DFS in its place. One Standard Chartered executive described the colourful DFS report – packed with allegations of “deception”, “fraud” and a “staggering cover-up” – as “like a John Grisham novel”. A director is reported to have allegedly remarked to a colleague "You f---ing Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians? "

My language is somewhat more restrained, but I must admit I have to agree with the worthy !