Tuesday, February 19, 2013

If you don't want to pay the fine or do the time, don't do the crime!

The old Cockney villain's adage has never been more true than it is today regarding the bankster whingers and their fellow apologists in the financial sector.

What a collective bunch of wusses and willy-wobblers they have turned out to be. From the 'Masters of the Universe' to the cry-babies of the trading floors in one short move.

The Daily Telegraph (can usually be counted to stand up for its banking friends in the City), of 18th February 2012 recounts in its Business Section the '...fears over extortionate US fines on British firms...'

The piece by Richard Blackden reports; "...It started last June when Barclays was ordered to pay a $360 million (£230m) fine over allegations its traders had manipulated Libor, one of the world’s most important interest rates...." Well, no, not exactly, the allegations of major fraud and conspiracy to defraud world users of financial lending products were true and have been admitted, and we have seen the emails to prove them. "...Since then, in an extraordinary eight-month period, a roster of top British companies has been fined an unprecedented $10.9bn by US authorities ranging from the Department of Justice (DoJ) to the Commodity Futures Trading Commission (CFTC)..."

"...Last August, Standard Chartered paid $340 million to settle allegations it violated America’s financial sanctions against Iran. Yes, close but no banana, Standard Chartered admitted breaching US sanctions, and this following a lengthy period of time when the bank had been in negotiation with the New York Authorities regarding their egregious conduct. This was followed by a $1.9bn fine on HSBC, which pleaded guilty to '...breaching anti-money laundering rules...'..." Well, what HSBC was really doing was laundering incalculable sums of drug money for the Mexican mafia, as well as providing banking services to terrorist organisations. When you read it like that it makes the Telegraph's phrase sound a little thin, but let's not be too picky!

"...After a brief respite in January, the DoJ and the CFTC last week slapped a $475 million penalty on RBS for manipulating Libor. And this week, Barclays confirmed in its annual report that it is being investigated by the US authorities over its emergency fundraisings with Qatar during the financial crisis..."

"...No wonder, then, that in the City of London there are mounting concerns that American regulators have developed an appetite for imposing excessive fines on British companies..."

What are these concerns, how excessive are these fines, and who is expressing these moans?

One leading fund manager has described the size of the fines as “extortion”. Richard Marwood, a fund manager at Axa Investments, said he is concerned that US regulators see large companies as piñatas (breakable containers of treats), easily bashed for cash..."

Another predictable moaner is Boris Johnson, who when the Department of Financial Services (DFS), a little-known and newly established New York regulator, wiped more than £5bn from Standard Chartered bank’s value in a single day, after publicly accusing the lender of helping Iran illegally launder $250bn though America’s financial system last August, bleated that the inflammatory language used in the attack was motivated by a desire to damage London’s claim to be the world’s financial capital.

The Mayor of London is an infamous, shameless opportunist who can never see a populist band-wagon without wanting to jump on for the ride, but his words were out of place in this particular case. Indeed, regulators on both sides of the Atlantic  have faced criticism in the US for not imposing tougher criminal sanctions over the Libor scandal, or the egregious volume of drug money laundering conducted by HSBC. With the economic recovery fragile and the public still angry over the financial crisis, experts say the authorities will only get tougher. “What some may see as an anti-British bias, I see as a shift towards sterner enforcement in the US following the financial crisis,”  said John Coffee, a professor of securities law at Columbia University in New York. He identifies how US regulators have historically imposed higher penalties than their counterparts in Britain. The CFTC and the DoJ both levied larger fines on Barclays and RBS over Libor than the UK’s Financial Services Authority, for example.

There is nothing new in this and it is to be only expected if financial institutions commit crimes in the US markets.

So, let us review the situation and see if we can put some sense into this discussion which is rapidly developing into a near farce-like situation.

In the USA, the regulatory system is largely run by men and women who have significant experience of dealing with criminal activity, and many of them are prosecutors or former prosecutors. In the USA, the criminal law is considered to be something that is important to uphold, because of the implications if it is not publicly observed to be enforced strictly. In the US, law enforcement agencies enjoy a far higher degree of kudos than they do here in the UK. The lawman is almost an iconic figure, and enjoys considerable respect, and he or she has a mission to uphold and enforce the criminal law to the letter.

It is a common journey undertaken by many young men and women from ordinary humble social backgrounds, to read for a law degree, pass the State and Federal Bar exams and then practise law. One way for an ambitious lawyer to get on is to spend some time in a State or Federal prosecutors office, either with a District Attorney's team or with a Federal State's Attorney. Alternatively, they can join a major regulatory agency such as the SEC or CFTC. Here they can make a sound reputation as a strong prosecutor, with a track record for going after and bringing down the biggest wrong-doers. By using the powers vested in them under US law, they are capable of taking down some of the toughest and most powerful criminals operating within their jurisdiction, and indeed, outside it in some cases!

How can they do that?  By making use of US extraterritorial jurisdictional powers, they can go after non-US citizens who commit offences in the USA but from outside the US jurisdiction.. You don't even need to have set foot inside the United States, to find yourself being investigated and possibly extradited for crimes which have been committed in the USA, and of which you may have been blissfully unaware.

So, if you transfer dollars from London to Zurich which have come from a criminal process, such as US sanctions busting, or money laundering, bribery, corruption, and a host of other crimes which the US wishes to interdict, even though you do it from London or Zurich, or anywhere else for that matter, you commit criminal offences within the USA, because the US dollars have to clear through the New York Bank Clearing System, and in so doing, the offences you are engaged in take place in part within the United States, and you are in the frame!

So any bank that chooses to engage in criminal actions, such as laundering unquantifiable numbers of dollars for Mexican drug gangs, or who decides to play fast and loose with US sanctions laws by ignoring their implications; or who wants to manipulate a global interest rate setting arrangement like LIBOR, or who just engages with criminal acts involving US dollars at the same time, is now firmly in the sights of US prosecutors, and can be extradited, tried and imprisoned in America.

This is what happened to the men who later became known as the Nat West Three, and you can read their adventures in full and be shocked by the powers that US lawyers and prosecutors possess.

The banks who have paid big fines in the US for their crimes, have only got themselves to blame. This has got absolutely nothing to do with US -v- UK financial business competition, it has nothing to do with envy of the UK as a financial centre, and it has nothing to do with seeing the UK as a free source of income for US prosecutors. If you hear anyone trotting out these shibboleths, you will know them to be ignorant of the law and the facts, and you should quietly ignore them because they are know-nothings!

Banks all like to tell us that they are global operators. Major banks no longer see themselves as somehow tied to any one country, the country of their origin. They all want to be seen as major global players, and when it comes to hiding their profits to avoid paying tax, they use this argument very strongly. Well, that's fine, but when you decide to play in the global market, you have to play by the rules of the market.

It's like going to the park and joining in with other blokes playing football, you take the game as it is being played. It's the same with global financial dealings, you play by the rules of the markets you are dealing in, and if you decide to screw around with the US markets, then don't whinge when the penalties are not to your liking.

The same is true when you deal in US dollars. If you screw with the Americans' rules or their currency, then you are bringing yourself into direct conflict with their rules and regulations.

You must understand, America is not a pussy-foot country when it comes to dealing with financial crime, and although in recent years, their own regulations have been diluted somewhat, if you fall foul of their laws, don't go thinking that it's going to be like sorting out the problem back home in the UK. Their prosecutors are not like the soft touches down at Canary Wharf and you won't get any political support from your Tory grandee mates in Parliament, you will be on your own.

So let us not hear any more about how unfair it is when you get a serious slapping from a US prosecutor, you should thank your lucky stars you are not spending time on Rykers Island or in Lompoc, which is where you would be if I had any say in the issue!

There is genuine and concerned commentary being made in the USA by experienced and honourable prosecutors, who are deeply concerned that executives from British banks have been allowed to walk away from these significant criminal operations, and no-one has been prosecuted or sent to jail.

They believe, as do I, that this flouting of the criminal law statutes in the US is sending all the wrong messages to the rest of the financial community. It is saying that there are banks who are too big to prosecute and bank executives who are too big to jail, and such a perception is undermining the effectiveness of the criminal justice process. This view is equally held in the UK by a number of commentators, and the present Coalition Government is behaving in a spineless manner for not having had the courage to face up to its City friends and say '...that's it, it's time to get the handcuffs on...'

Ordinary men and women in the UK are facing years of austerity, watching their savings being eroded by inflation; and suffering because of the financial crisis foisted on us by the major banks. They fell over backwards to encourage millions of people to load themselves with debt, secure in the knowledge that having securitised the lending, they would not have to stand behind the package if it all unwound. Their criminal activities have sentenced the rest of us to years of financial uncertainty, but they still insist on being paid ridiculous salaries, and obscene bonuses, when there isn't a man or woman among them who is worth the money he or she is still taking home.

A few targeted prosecutions would be a cathartic process and would help to send the message that the bankers are not immune from the process of law. It is time for the banks and their bankster executives to face up to the consequences of their criminality and stop whingeing about the outcomes, they are only getting what they so richly deserve.


lifeafterdebt said...

Well said, another post which spells out what should be happening to the UK's fraudulent bankers but just doesn't. Instead, in the UK, austerity measures dictate the victims of banking fraud are disarmed while the wishes of the majority are ignored. Wrote this in disgust.

cringing2 said...

I think you're giving way too much credit to the US regulators. The UK may set the low standard but it's not up to much to only just beat it.

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