“…Lies, Damned Lies and US Treasury Statements…”

Daniel Glaser is a deputy assistant secretary of the United States Treasury for terrorist financing and financial crimes. He also heads up the US delegation to the Financial Action Task Force.

On 28^th February 2008, Complinet reported the latest finding of the FATF regarding Iran. Complinet has reported how the new finding has not altered the world advisory situation with regard to Iran from the previous finding in October 2007. International banks are still encouraged to apply enhanced due diligence when dealing with Iranian institutions.

Nevertheless, the FATF went to great pains to acknowledge that;

“…Since its October 2007 Plenary meeting, the FATF has engaged with Iran and welcomes the commitment made by Iran to improve its AML/CFT regime… Iran is encouraged to continue its engagement with the FATF and the international community to address, on an urgent basis, its AML/CFT deficiencies...”

The finding reflects the fact that the Iranians have taken significant steps to cooperate with the FATF, they have attended a meeting in Paris in January 2008 when they presented their AML programme to the representatives of the FATF, and answered a wide range of questions; that they have subsequently passed their first law dealing with AML issues, and that they have continued to liaise with the FATF, as requested.

The stated finding of the FATF is clear, unequivocal, and makes an open statement of their deliberations.

So, it is legitimate to ask why it is that Daniel Glaser, one of the delegates to the FATF, when asked to comment upon the latest findings of the FATF Committee, of which he was a constituent member, did not report the findings in an equally clear, unequivocal and open manner.

In responding to a question posed by the New York Sun, Mr Glaser is reported as having given answers that put a wholly different slant to the story. The Sun writer states;

“…American officials saw the FATF's statement as a victory in their financial war against Iran. "It was a great result," America's chief envoy to the task force, Daniel Glaser, said in a phone interview from Paris. "What this action does is call upon all countries in the world to inform their financial institutions of the significant anti-money-laundering financial risk Iran represents. As a result of this action, financial authorities around the world will be requiring their financial institutions to conduct enhanced scrutiny on Iran-related transactions."

Mr. Glaser, who is a deputy assistant secretary of the Treasury for terrorist financing and financial crimes, said the FATF's action was more robust than a warning…”

Daniel Glaser has made no secret of his support for the policies of his US Treasury boss, Stuart Levey, whose openly-stated ambitions are to cripple the Iranian economy and to bring the Iranian nation to its knees by fomenting a popular revolution in that country. Mr Glaser’s telephone conversation with the New York newspaper clearly enabled it to observe;

“…In a move that could cripple Iran's banking sector, the world's premier anti-money-laundering body warned its 34 member states yesterday to advise their banks of the risks of doing business with Iranian banks, citing worries about the Islamic nation's financing of terrorism…while the Paris-based Financial Action Task Force suggests only a warning, the seriousness with which the world's banks will respond to its official statement has the potential to starve Iran of much of its legitimate capital…”

An FATF official who has asked not to be named has confirmed that It is a convention of the FATF that all members of any committee are jointly bound by the agreed statements which are published in their name.

It is not considered to be a proper course of action to make any other statement which might give a different interpretation of what is reported in their name. Individual members are expected to report findings fairly, giving full status to the reported communiques issued by the FATF.

In light of this statement, it is legitimate to ask why Daniel Glaser has found it necessary to be so outspoken, indeed, so triumphalist in his comments. Why did he deliberately choose to ignore any of the positive comments made by the FATF, why has he continued to seek to damage Iran by his comments? He is a co-chair of the committee which is sitting in judgement on Iran and it may be thought that it is entirely improper for him to behave in this way.

His actions could have a significant impact upon the due process within which the FATF itself is seeking to engage. It could conceivably lead the Iranian delegation to legitimately ask whether they are likely to receive a fair hearing, when the co-chairman behaves in this manner, a situation which would paint the FATF in a very bad light indeed.

It is also legitimate to ask which masters Mr Glaser is seeking to serve by behaving in this egregious manner. His actions can not serve the long-term interests of the US, after all, the Bush administration has literally only months left to run. The US Presidential hopeful, Barack Obama has already said that if elected, he will engage in diplomatic discussions with Iran.

It is beginning to look as if Mr Glaser realizes that time is running out for his poisonous policies towards Iran, and those who command his real loyalties, and that his actions betray his true allegiances. It may also be felt, more importantly, that such a realization could bring the FATF itself into disrepute, if it became more widely perceived that influential committee members were intent on serving their own agenda, and not the agreed agenda of the Financial Action Task Force, to which end they have been appointed.

Even more disinformation from the US Treasury

The FATF announced today (28^th February 2008) that it does not intend to take any further AML/CTF interventionist action against Iran, following the publication of its earlier notice in October 2007.

The FATF notice states;

“…Since its October 2007 Plenary meeting, the FATF has engaged with Iran and welcomes the commitment made by Iran to improve its AML/CFT regime. Consistent with its Statement on Iran, dated 11 October 2007, the FATF confirms its call to its members and urges all jurisdictions to advise their financial institutions to take the risk arising from the deficiencies in Iran’s AML/CFT regime into account for enhanced due diligence. Iran is encouraged to continue its engagement with the FATF and the international community to address, on an urgent basis, its AML/CFT deficiencies...”

The FATF specifically recognizes therefore the commitment made by Iran to improve its AML regime and encourages it to continue the same. The FATF had the power to impose other sanctions against Iran, but because of its open and transparent cooperation with the FATF, it has chosen not to alter the existing situation, and will continue to work with Iran to remedy all deficiencies.

However, this has not satisfied those officials in the US Government whose ambitions are to harm Iran at every possible opportunity.

Complinet has published a number of articles recently dealing with the impact of US Treasury behaviour on the Iranian banking community, both in the UK and elsewhere.

To recap, the US is deliberately engaged in actions designed to bring significant pressure on other banks and financial institutions, to encourage them to cease any form of financial activity with or for Iranian banks, anywhere in the world.

The source for this policy decision emanates from an office within the US Treasury called the Division of Terrorism and Intelligence, which is headed by Under Secretary Stuart Levey.

Levey has made no secret of his ambitions to bring Iran to its knees, financially and to destabilise its internal economy to such an extent that it will force a popular revolution to overthrow the present government in Iran. A recent quote from the Kansas City Star states;

‘…Washington has boasted that the US and existing UN sanctions, have taken a significant toll on Iran’s economy, particularly on its unemployment and inflation rates and raised pressure on the Government…’

To facilitate his ambitions, Levey and his satraps are always willing to spin news stories and put false and misleading interpretations on any reports which thus enable Iran to be cast in a bad light.

Complinet last reported on the way in which the meeting between the FATF and an Iranian delegation in Paris, in January of this year, was reported in the world media, as the result of a deliberately misleading story issued by the US Treasury.

Now, Levey has issued his own interpretation of the FATF announcement of 28^th February 2008. Ignoring the fact that the latest FATF report means that nothing has changed with regard to the Iranian situation, speaking from Dubai where he is openly engaged in seeking to stir up anti-Iranian sentiments in the Gulf region, he deliberately fails to report the fact the FATF noted its recognition of its recent engagement with Iran, and the commitment shown by Iran to improving its AML/CTF position.

However, despite the increasingly bizarre attempts being made by Levey and his subordinates, including Daniel Glaser, to cast Iran in an unfavourable light, in the hope that by so doing, it will influence the UN to impose even further sanctions on Iran, the Iranians will continue to engage with the main body of the FATF in all attempts to ensure that their AML/CTF regime is fully in accordance with FATF requirements.

Daniel Glaser presently leads the US delegation to the FATF, and his name figured prominently in the previous misleading story which sought to undermine the real reason for the Iranian January meetings with the FATF in Paris. Like Levey, Glaser has been widely quoted as saying that his office is part of the engagement to deter foreign banks from doing business with Iran, and seeking to undermine the Iranian economy. In view of this obvious conflict of interests, Complinet has already questioned his suitability to be a co-chair of the FATF committee which sits in judgement on Iran’s compliance with the FATF requirements.

By adopting these measures of continually attacking Iran publicly, measures which are increasingly being disseminated in the Middle East, the US is painting itself into a corner and is being perceived in much the same light as the boy who cried ‘wolf’ once too often. It has become apparent that many will begin to think that they have protested too much!

More disinformation from the US Treasury

On Saturday 16^th February 2008, the International Press Agencies all began carrying reports of a ‘secret’ meeting held between US and Iranian officals in Paris earlier in January.

Depending upon which agency you read determined what story you received, but suffice it to say that the majority of the articles carried by the US agencies all placed a major US ‘spin’ on the piece.

Take this as a typical example from the Kansas City Star;

“US secretly met Iran banking officials”

‘…A US official met secretly with Iranian banking officials and senior government aides who oppose punishing the Islamic nation for not doing enough to stop money laundering and terrorism funding…

The United States was represented by Daniel Glaser, the Treasury Department’s deputy assistant secretary for terrorist financing and financial crimes…The meeting was part of the Bush administratiuon’s attempts to ramp up international pressure on Iran to halt atomic activities that could lead to the development of nuclear weapons…’

The way this story is reported places a wholly inaccurate interpretation on the events, and attempts to portray the US’s part in these events in a fictitious light. It is yet another example of the way that the US Treasury continues to disseminate a stream of disinformation about Iranian affairs, particularly Iranian banking and financial affairs, as part of a deliberate US policy to destabilise the Iranian state and its internal economic policies. As the Kansas City Star states quite openly;

‘…Wsahington has boasted that the US and existing UN sanctions, have taken a significant toll on Iran’s economy, particularly on its unemployment and inflation rates and raised pressure on the Government…’

For the record and in the interests of fairness and accuracy, the meeting which took place in Paris at the HQ of the Financial Action Task Force, did so as the result of a specific request from the FATF, in a notice it published in October 2007, in which it expressed its concern over the apparent absence of Iranian laws dealing with anti-money laundering and in which it invited Iran to engage with the FATF, advising that ‘…The FATF looks forward to engaging with Iran to address these deficiencies...’

As a result of this notice, the Iranian Government accepted the FATF request and agreed to attend the meeting in Paris in January to discuss a whole range of issues regarding the state of the development of laws and regulations within Iran for the interdiction of money laundering and terrorist financing.

The meeting was co-chaired by the Italian representative and the US representative, Daniel Glaser. Quite why the US representative was chosen to chair this delicate meeting is not clear, but in light of recent events it may be thought more prudent that he will be replaced at future meetings.

The meeting was reported to be cordial, focused and covered a wide range of issues. The Americans it is reported, played no particularly significant part over any other participant, nor was the meeting anything to do with any policy initiatives on their part, either in Paris or elsewhere. They were merely present at the meeting in the same way as the other FATF representatives, all of whom would have expected the meetings to be kept confidential.

Complinet has recently reported some of the activities being undertaken by agents of the US Treasury in seeking to bring significant economic pressure on the Iranian banking community by threatening other banks and international businesses who have business with Iran that the US will seek to impose draconian penalties on those entities if they continue to do business with Iran.

Complinet has previously identified how the pressure for these unlawful activities has been directed from and by agents of the office of Stuart Levey, US Under Secretary for Terrorism and Financial Intelligence. By focusing on the tactics of pressurizing foreign companies who trade or deal with Iran to drop their business activities, Levey and his team engage in a wide range of activities designed to bring financial and commercial pressure on Iran. The aim is to bring about a revolution from within Iran by so destabilizing the economy of the country that regime change will be effected through a popular revolution.

In view of the proximity of Mr Glaser to Mr Levey, it may be thought reasonable to assert that Mr Glaser is guilty of a significant conflict of interests, and that the Iranians might not unreasonably feel that their own transparent deliberations with the FATF are being undermined by Mr Glaser’s position as co-chair of the meetings, as he is a direct satrap of the very official who is doing everything he can to unfairly undermine the Iranian economy.

It is surely no accident that having observed the willing acceptance by Iran of the FATF invitation to enter multilateral discussions, followed by an even more recent announcement of the passing of the Iranian law outlawing money laundering, that the Americans could easily see that their widely trumpeted allegations of Iranian regulatory non-compliance would now begin to ring a bit hollow.

Hence, the sudden outburst of articles all claiming US initiative for engaging in these recent meetings, and playing up their involvement.

The FATF are engaging in a perfectly proper exercise of their function in encouraging Iran to share with FATF full details of her legislation and other proposed initiatives to engage in a full AML and CTF regime of compliance. In her turn, Iran is complying with the legitimate requests from the FATF, and will be engaging in other meetings when invited in the future.

It would be attractive if the Americans would cease their deliberate attempts to subvert the due process which is taking place, and allow those better-placed to judge the bona-fides of the Iranian procedures, to get on with their work. No-one suggests that the US should not be a party to these deliberations, but in the present circumstances it would be better, and it would certainly look a whole lot fairer to other countries, if Mr Glaser took a back seat.

Deterring the US bullies

In December 2007, I published an article entitled;

‘…US authorities turn screw on Iranian banks in the UK…’

Since the publication of that article, I have continued to engage in discussions with a wide variety of UK-based businessmen, and the list of persons on the receiving end of US bullying does not stop at financial institutions. Brokerage houses and oil trading companies have also received their visits from the ‘men in the dark blue blazers’, as they were described to me.

The message was the same. Do business of any kind in any currency with Iran, clear their trading requirements, handle their brokerage, engage with their oil handling, open LCs for them, and you will feel the wrath of the US Treasury!

Unable to get any response at all from any official body in the UK, even finding someone who would even return my calls made me begin to realise that there was a lot more to this issue than at first met the eye. It began to resemble nothing so much as the ‘…strange case of the dog in the night-time…’, or the dog that did not bark.

The Sherlock Holmes mystery the "Silver Blaze" was about the theft of an expensive race horse from its stable. During the investigation, Inspector Gregory of Scotland Yard asked Holmes if there was any particular aspect of the crime calling for additional study. Holmes replied "Yes," and pointed to "the curious incident of the dog in the night-time." Inspector Gregory replied, "The dog did nothing in the night-time." Holmes said, "That was the curious incident." In this case, the failure of the dog to bark when the horse was stolen showed the dog knew the thief. This was an important material fact; it considerably reduced the number of suspects, and eventually solved the case.

Growing increasingly suspicious that the British Government might have been turning a deliberate ‘Nelsonian’ blind eye to the wholly unlawful activities of agents of another government, I began to research who these shadowy figures might be and whose interests they might possibly represent.

I have done this with the specific intention of identifying methods and techniques which I would advise British businesses to adopt if they become the recipients of such unlawful conduct in future, as a means of protecting their own commercial interests, and how to respond to these unlawful threats in the future.

Let us be really clear of our terms of reference here. No agent of a foreign government can come to the UK and dictate to any British business how or where that business will carry out its lawful activities. We operate in a highly rule-oriented business environment. The risk-based approach which now determines our every compliance move demands that we engage in a pattern of behaviour which can be scrutinised in the finest detail by our regulatory supervisors. Serious penalties exist for any perceived failure to comply with the new rules and regulations. What is called for is the highest degree of transparency and certainty in the way in which the regulatory environment is enforced.

Receiving unattributable threats of dire commercial consequences from agents of a foreign state, if British banks do not fall into line with their unlawful demands, is not an acceptable state of affairs. Our institutions have every right to expect that the Government will protect them, and once confronted with the evidence of such conduct, should make every move to ensure that the foreign state was appraised, in no uncertain terms, of the displeasure felt by Her Majesty’s Government at such conduct, coupled with stringent demands that such behaviour will cease forthwith.

And what did we get in response when such evidence was laid in front of the relevant Government official? Sadly, we got a predictable response from an aptly-named man, many of whose public outpourings in the money laundering debate leave much to be desired. (See Complinet - Regulus, August 1 2006). Ed Balls made it abundantly clear that he was going to do absolutely nothing about the allegations laid at his door, and, having washed his hands of any responsibility for protecting the British commercial interest, left them to the tender mercies of the American bullies!

So, who are these latter-day ‘new centurions’, these ‘born-again avenging angels of the wrath-to-come?’

Step forward a motley collection of what Sasan Fayazmanes, Chair of the Department of Economics at California State University, Fresno, has described as ‘…individuals who make US foreign policy, particularly the "neoconservatives," and who represent a privileged group of people with a unique and peculiar view of the world. To these "neoconservatives" waging wars against Palestine, Iraq, Lebanon, and possibly Iran and Syria, might appear to be in the "interest" of the US, even though in actuality such policies might be very harmful to the interest of ordinary citizens of the US, particularly in the long-run...’

In an article entitled ‘…The US, Israel and Iran: An Interview with Sasan Fayazmanesh…’, published on 19^th March 2007, Ms Fayazmanesh expands her arguments. She states;

‘…When the Bush Administration came to power, more radical members of the Washington Institute, such as Paul Wolfowitz and Richard Perle, took over the formulation and implementation of the White House Middle East policy. These "neoconservatives" were closely linked to the (Israeli) Likud party members, particularly Binyamin Netanyahu. As such, their idea of "containment" of Iran and Iraq went beyond the roundabout way of passing sanctions to ruin the economy of these countries, bringing about discontent, causing revolt and then overthrowing their governments; they advocated a more direct way for "regime change": using the military might of the US to attack these countries. Yet another such individual is Stuart Levey, the present Treasury Department's Under Secretary for Terrorism and Financial Intelligence. Levey has been working zealously to stop foreign banks from dealing with some Iranian banks. In 2005 Stuart Levey gave an address at AIPAC that began with: "It is a real pleasure to be speaking with you today. I have been an admirer of the great work this organization does since my days on the one-year program at Hebrew University in 1983 and 1984. I want to commend you for the important work that you are doing to promote strong ties between Israel and the United States and to advocate for a lasting peace in the Middle East." Then he goes on to talk about what his office does and how "[w]e levy economic sanctions to pressure obstructionist regimes, and we have the ability to freeze the assets of wrongdoers."

Yes, step forward Stuart Levey, Under Secretary for Terrorism and Financial Intelligence.

Mr Levey is the leading influence behind the brave boys who have been running around London issuing their threats against British banks. Mr Levey is proud of his actions and makes little attempt to hide his ambitions. He stated in a speech to the American Enterprise Institute for Public Policy Research on September 8, 2006;

‘…As our government took stock of all of its tools to combat terrorism and the Executive Branch was reorganized after September 11, President Bush, members of his Cabinet, and the Congress recognized that the Treasury Department had unique authorities that could contribute to the fight. This was the genesis of the office I oversee, the Office of Terrorism and Financial Intelligence...’

Mr Levey has learned some very important lessons while in the employ of the US government. He has learned how to position his ambitions and those of his office in such a way that to the uninitiated, they seem almost benign. He has learned how to apply soft words to re-interpret harsh deeds, and he has learned the same lesson that every con-man knows which is ‘if you are going to mislead someone, then do it in the biggest way possible. People will be much more likely to believe you and far less likely to disregard you.

When it comes to the way he interprets his role and that of his officers, he starts predictably, but watch how the message becomes more and more polarised as he gets into his stride;

‘…To maximize the effect, we try to apply these measures in concert with others. Whenever possible, we act with a partner or a group of allied countries. In some cases, we can designate a target at the United Nations. We also have important new regulatory authorities in the United States, such as Section 311 of the USA PATRIOT Act. Section 311 allows us to designate a foreign financial institution or jurisdiction to be of "primary money laundering concern." The impact of that particularly has been more powerful than many thought possible…targeted financial measures warn innocent people not to deal with the designated target. And those who might still be tempted to deal with targeted high risk actors get the message loud and clear: if they do so, they may be next… A second powerful lesson we've learned is that -- particularly in the context of "targeted" sanctions -- we share common interests and objectives with the financial community. Financial institutions want to identify and avoid dangerous or risky customers who could harm their reputations and business. And we want to tell them where those risks lie…’

‘…As I have travelled and met with bank officials abroad, I have learned that even those institutions that are not formally bound to follow U.S. law pay close attention to these targeted actions and often adjust their business activities accordingly. Why? There are two reasons: First, regardless of the underlying law in any particular country, most bankers truly want to avoid facilitating proliferation, terrorism, or crime. These are responsible corporate citizens. Second, avoiding government-identified risks is simply good business. Banks need to manage risk in order to preserve their corporate reputations. Keeping a few customers that we have identified as terrorists or proliferators is not worth the risk of facing public scrutiny or a regulatory action that may impact on their ability to do business with the United States or the responsible international financial community...’

The insouciance Mr Levey adopts is truly breathtaking. He is not telling us how to arrange our business affairs, we are merely ‘adjusting’ our own affairs willingly, even though, as he admits, we are not bound to follow US law. Why are we doing this? Well, apparently we don’t want to keep a few customers ‘…that may impact on our ability to do business with the United States or the responsible international financial community…’

You see, it’s all quite voluntary and absolutely normal because we are ‘…responsible corporate citizens...’

Well, if that’s the case, why do selected Americans deem it necessary to lie so bare-facedly about the present situation in Iran, about the nuclear issue as an example, even when their own intelligence agencies have categorically told them that Iran is not pursuing a nuclear weapon capability? Why do they not provide the asserted evidence of the movement of funds to Hizbollah, which Bank Saderat has repeatedly asked for, and upon which basis they subject Bank Saderat to worldwide calumny. Consider the following statement from Levey;

‘…Iran provides Hizballah with hundreds of millions of dollars each year, which is why I have said that Iran is the central banker of terror. It is remarkable that Iran has a nine-digit line item in its budget to support Hizballah, Hamas, and other terrorist organizations at the expense of investing in the future of its young people...’

‘…As we continue to deal with the challenge presented by Iran's pursuit of a nuclear weapons program, we must also confront its support for terrorism. We have taken several steps to do so this week…’

‘…We have cut off Bank Saderat, from the U.S. financial system. Here is why: This bank, which has approximately 3400 branch offices, is used by the Government of Iran to transfer money to terrorist organizations. For example, since 2001, a Hizballah-controlled organization received $50 million directly from Iran through Saderat. Hizballah uses Saderat to send money to other terrorist organizations as well. Hizballah has used Bank Saderat to transfer funds, sometimes in the millions of dollars, to support the activities of other terrorist organizations such as Hamas in Gaza. We will no longer allow a bank like Saderat to do business in the American financial system, even indirectly…’

George Bush was pushing this same old story this week in the Middle East. If he wants to be believed, why will his agent, Stuart Levey, not provide the evidence to Bank Saderat to back up his assertions? What has he got to hide from the truth being publicly seen. Or is it more likely that his political affiliations make it in their interests to keep up the pressure on Iran but without really telling the truth?

Levey again;

‘…Our actions this week are a sign of the costs that we will impose on the Iranian people if the leadership chooses to remain on its current path of defiance. The regime will end up isolating Iran from the world community, with reputable financial institutions becoming increasingly unwilling to handle Iran's business. The Iranian people deserve better than a government willing to sacrifice their economic well-being to pursue weapons they don't need and policies that result in the deaths of innocent civilians...’

Yet again, Levey knows, because his own intelligence agencies have told him, Iran is not seeking to build weapons, but why let the facts get in the way of a good foreign policy!

So, what can we do if Mr Levey’s blue knights come to our offices and start bullying us with their threats.

The first thing to do is to remember that it is a very serious criminal offence for anyone to make what is called ‘…an unwarranted demand with menaces…’

Under s21(1) of the Theft Act 1968, in English law, a person commits the offence:

If, with a view to gain for himself or another or with intent to cause loss to another, he makes any unwarranted demand with menaces; and for this purpose a demand with menaces is unwarranted unless the person making it does so in the belief:

(a) that he has reasonable grounds for making the demand; and

(b) that the use of the menaces is a proper means of reinforcing the demand.

The Act uses the word "menaces" which is considered wider in scope than "threat" and involves a warning of any consequences known to be considered unpleasant by the intended victim. This covers the spectrum from actual or threatened violence to the victim or others, through damage to property, to the disclosure of information.

It is manifestly clear that the US agents, in making their threats that the US Government will subject a British bank to hostile treatment if they continue to undertake lawful commercial business with Iranian entities, are guilty of such an offence, and the persons making such a threat can be imprisoned for up to 14 years. They cannot possibly have any reasonable grounds for making such a threat, they are acting completely illegally, and the use of the menaces is completely improper.

The loss to be caused does not need to be sustained by the recipient of the threat, it could just as easily be the Iranian counterparty who suffers.

So, at the first sign of any such threat, don’t rise to it or start to protest. It would be wise to just excuse yourself from the meeting, slip out of the room and make an immediate telephone call to your local police office and ask that police officers be sent immediately. State the fact that you are on the receiving end of a serious blackmail threat and that the suspects are still in your offices. You will find the police will get there quickly enough. Let our US friends try and talk their way out of their unlawful conduct to a couple of detectives, and see how far they get.

Alternatively, if the threats you have already sustained are causing you concern about what you can do lawfully or what you might want to do in future, then your institution should be considering undertaking preliminary legal action in the US. I have spoken to US lawyers and they are adamant that no US agency should be conducting themselves in this manner, and that if any such threats have been made, such persons can be called to account in the US courts, and they can be required to identify the evidence upon which they seek to rely to back their assertions of terrorism or criminality.

One New York lawyer of my close acquaintance said to me;

‘…It may have escaped your notice, but the USA is still a country with the rule of law. If these crazies want to threaten law-abiding people, they must not do so without the clearest proof of probable cause and they have to demonstrate the evidence they seek to rely on. They can be required to prove the veracity of that evidence, and in many cases we succeed in demonstrating that it is nothing but hot air…’

I suspect that the mere suggestion that your bank will seek to test the validity of these threats in the US courts will be enough to get these people out of your offices. But what the hell, call the cops first and let them spend a few hours in the cells at Wood Street nick, while their Embassy tries to determine whether they have diplomatic status!

Yankee go home!

British banks trading in London have received visits from US Treasury agents during which the Americans have spelt out very stern warnings over any dealings these banks may be having with Iran or Iranian-owned institutions, and threatening them with direct sanctions if they clear financial transactions for the Iranians.

The Americans have also contacted a whole range of international banks trading in and from London, giving them the same warnings.

These warnings do not simply accommodate US dollar-based transactions, but include any dealings of any kind, and in any currency. They are unequivocal; do business with Iran and risk US displeasure which can include denying you access to the US Bank Clearing System.

These warnings have had very serious implications for those Iranian banks which operate in London, some of which are in fact British institutions, and who having been in business here for many years, are regulated by the FSA.

Quite what right the Americans have to tell British banks who they may do business with is not clear, and to threaten them that if they clear British Sterling transactions for Iranian banks, that they will subject them to Patriot Act interdictions in the US, should be a matter of significant concern to the British Government, if for no other reason than it would seem to be a direct contradiction of the much-publicised ‘special relationship’ which we are supposed to enjoy with them.

And what has been the response from H.M Government to this news?

It can be best expressed as ‘studied indifference’!

It seems that the British Government under Tony Blair was not only willing to be George Bush’s tame poodle abroad, but was also quite content to stand by and do nothing while Bush’s agents swaggered around the City of London, threatening our banks with dire consequences if they continued with their lawful business.

Behind this scandalous scenario, lurks a hostile agenda, aimed directly at the commercial interests of Iran globally, and at their banking activities in the City of London more specifically.

For years, the US has designated Iran as a jurisdiction which is largely prohibited from doing business with US entities. Iranian banks have not been able to do business in the US since 1995. Settlement of US dollar transactions through New York was only permitted through the use of the so called “U-Turn” exemption. Iranian banks were able to settle US dollar payments by using non-US banks as clearing agents, who clear the payments through their US correspondent banks.

More recently, the US has sought to increase the pressure on the Iranian economy, using the excuse that Iran was seeking to further develop nuclear technology with the aim of developing a nuclear weapon, despite the absence of any meaningful evidence to prove the substance of this allegation.

The most immediate catalyst for this increased pressure adopted by the US was to allege that Iran, through its state-owned entity, Bank Saderat, Iran, and specifically its ‘London branch’, Bank Saderat plc, had been involved in making payments to agents of Hezbollah in Beirut. Again, this allegation has been made without any evidence being advanced to prove its veracity, and appears to be based entirely on the sole fact that Bank Saderat has branches in Beirut.

Bank Saderat plc is not a branch of the Iranian entity, but a wholly-owned subsidiary, an entirely British Bank which has been doing business in London since 1963. It was regulated by the Bank of England and now by the FSA. It is entitled to the same protection and support as any other High Street banking entity.

The USA deems the whole of the Hezbollah organisation to be a terrorist entity, as do the Netherlands, Israel and Canada. The UK and Australia include only the Hezbollah external security organisation within their terrorist definition. No other country in the world, including the European Union define Hezbollah as a terrorist entity, although some individual member states have categorised various actions as being reprehensible. Hezbollah is defined by many countries as being a freedom fighting organisation.

Iran is a signatory to the Treaty on the Non-Proliferation of Nuclear Weapons (hereinafter, NPT), and it has not sought to disguise the fact that it is engaged in the process of seeking to find ways of enriching Uranium. These activities have attracted certain focused sanctions from the UN, while the Iranian government has continuously asserted that this enrichment program is part of its civilian nuclear energy program, which it is permitted under Article IV of the NPT.

When the real facts are examined however, what is known and can be independently confirmed is that the most recent examination by the IAEA has demonstrated that Iran is generally in compliance with their internal requirements, and more importantly, that the December 2007 National Intelligence Estimate judged, with "high confidence,” that Iran had halted its nuclear weapons program in 2003. CIA

This most recent announcement however has not stopped some United States agencies from continuing to assert that Iran poses a generally vague threat to the West. This is not altogether surprising. Remember, these so-called intelligence people are the same ones who continued to insist that Iraq had weapons of mass destruction, long after the real truth was in the public domain.!

Whatever the realities of these different situations, why should these issues be considered sufficient to permit America to dictate to British banking institutions how and where on the globe they should be allowed to exercise their right to do business, and why does H.M.Government remain silent?

In 2007, the United Nations issued a short and limited sanctions list aimed at specific entities and individuals in relation to the provision of arms and related ‘materiel’. In the same notice, it continued to assert the rights of Iran to develop nuclear energy for peaceful purposes in conformity with its obligations under the NPT, and in this context reaffirmed their support for the development by Iran of a civil nuclear energy programme.

The Bank of England has issued its own very short list of proscribed persons and entities against whom they determine that trading sanctions exist. Subject to these provisions, British Banks are free to do business with whomsoever they decide.

When the Americans first alleged that Bank Saderat’s London entity was responsible for moving money to Hezbollah in Beirut, the bank’s management wrote first to the US Office of Foreign Assets Control (OFAC), completely refuting the allegations in their entirety but asking for any evidence of such payments to be shared with them so that the bank could check the veracity of their compliance requirements.

At the same time, the Bank instructed a leading British Accounting Consulting firm to undertake a complete review of all payments they had made to their Beirut branches to ascertain the truth or otherwise of the allegations.

Bank Saderat plc did everything they could to determine the truth or falsity of these allegations made by the Americans, but despite all their enquiries and investigations, they were unable to identify any payments at all which were not made to established payment accounts in their Beirut offices.

Their urgent requests for corroborative evidence to OFAC, fell on deaf ears. The Americans have to this date produced no evidence of any wrong-doing whatsoever. They have not even responded to the correspondence, yet they continue to skulk around the City’s streets issuing highly damaging threats to any bank which might contemplate conducting business with Iran.

This can be construed as nothing more than a unilateral campaign of economic sabotage and criminal disinformation, aimed at causing the highest level of financial damage to the Iranian economy with the ambition of bringing significant pressure on the Iranian people. Very sadly, these efforts have been working, and a large number of banks have acted in response to these threats. Clearly, they have taken the US threats of retaliatory action seriously, no bank wants to voluntarily cut itself off from good business sources, but they have decided that their US dollar-clearing requirements outweigh their commercial relations with Iran.

Why should the Americans do this? Because, believe it or not, they really believe that this economic pressure will lead to a policy of regime change in Iran?

Last week, while in Kuwait I spoke to a US Customs agent who in a series of dismissive asides, stated that it was the determined policy of the present US Administration to put such economic pressure on the Iranian people so that it would encourage a popular uprising among the people, with the ambition that they would overthrow the present Iranian government.

After its efforts to ascertain any evidence which could point at a failure within its own compliance procedures, Bank Saderat sought the support of the BBA who subsequently wrote to the UK Treasury, setting out a series of concerns they had identified which were having direct impacts upon Iranian banks in London. Their correspondence pointed out that non-US institutions had started to cease dealings in any currencies with Iranian owned banks, wherever incorporated and regulated, even though they had not broken any local or US laws.

They gave examples identifying how a number of leading international banks conducting business in London had withdrawn US$ clearing arrangements at very little notice;

· How a leading British institution had withdrawn Sterling clearance arrangements from at least one Iranian-owned bank;

· How a major Swiss bank would not accept transactions in any currency either on its own account or for third party accounts;

· How a major UK bank would not accept any transfer to third-party accounts in any currency if they originated from Iran or from Iranian-owned banks in the UK;

The BBA’s letter identified the egregious nature of what it called the ‘informal’ actions of US Treasury Officials, striking at the heart of what London offers as a place of business.

The BBA called for evidence, if it existed, to be produced by the USA, and called upon HM Government to provide more pro-active expressions of support for Iranian banks and to move from a stance which both the FSA and the Bank of England appeared to be adopting, of what was described as ‘studied neutrality’.

The BBA called for a meeting with officials to discuss these concerns!

And the response from H.M.Treasury?

An arrogant and dismissive 3-paragraph letter from Ed Balls who was Economic Secretary to the Treasury at the time, which wholly ignored all the points in the requests being made by the BBA for discussions.

The first paragraph contained a series of worthless platitudes about the Government and the banking sector working together to protect the City from illicit money flows, an issue which had not been addressed by the BBA because it was not germane; a paragraph which made an wholly irrelevant referral to the UN Resolution 1737, which again, was not part of the issues raised by BBA, because again, it was not germane; and finishing with a patronizing comment about the need for banks to make their own commercial judgements about whom they do business with.

Clearly, Balls, and those who advised him, thought that unlawful US threats to British banks and their commercial interests were not worthy of comment, and merely fell among the ordinary and relevant information which financial institutions should take into account when deciding with whom they could do business!

The British Government has so effectively sold the pass to the Bush Administration, that they can no longer be bothered to protect those commercial interests, nationally valued rights which once would have guaranteed a very stern riposte indeed. The New Labour Government has poodled so effectively that they will now stand, idly by, wagging their tail, while Bush’s Treasury attack dogs force their will on the international banking sector with impunity.

The true measure of a genuine friendship is that one friend can tell the other when they are behaving wrongly or in an improper way, without the information causing a rift in the relationship. It is about time that H.M.Government started to stand up to their US counterparts and started to tell them some home truths. Inviting them to go home and parade their particular brand of bank regulation inside their own jurisdiction would be a good place to start.

Another Financial Collapse

Northern Rock

The fall-out from the Northern Rock episode contains some signal lessons for both the Treasury and the FSA. Whether they will be heeded, of course, is a matter of mere conjecture, so should they need spelling out, I shall do my best to elucidate.

The first lesson is that whatever losses are caused to the financial sector by financial crime and money laundering, even when counted together, they are as mere pin-pricks, when compared to the losses which can be caused, even by one institution, if it decides to go and play in markets and with financial products it doesn’t really understand.

The second lesson is that focussing ones’ regulatory attention for too long on an unproven risk, takes one’s attention away from the real threats. Lead by a Government whose slavish adherence to US-inspired fantasies of global criminal conspiracies has left it wallowing in a form of quasi-religious zeal in its reported determination to go after the Napoleons of Crime and the terrorist godfathers, we have been forced to focus on the perceived dangers to the financial sector from an unquantifiable number of the dangerous class, and we have taken our eye off the antics of the usual suspects in the financial sector, the market practitioners themselves.

Despite the absence of any meaningful statistics or empirical evidence to back up their wild assertions, repeated Treasury and Home Office Ministers have lamely trotted out the old law enforcement shibboleths of the risks from criminals, and have connived in a wholesale reconstruction of our laws, and the withdrawal of whole areas of civil liberties, all in the name of combating a phantom army of crooks, terrorists and wise-guys, whose number or activities no one can determine .

And all the time, the activities of the regulated sector pose, as they have always posed, the biggest risk to the financial stability of the entire British financial services arena.

It is really rather simple actually.

I have lived through an era when it was very hard to get a mortgage, and if you wanted one, you had to have a track record of prudent savings in one of the old Building Societies, savings which would enable you to demonstrate that you were the right sort of investor that the lenders wanted to lend to.

If you wanted a loan, you had to have a very good reason, and you had to have collateral with which to back your request. Banks and financial institutions did not advance money to every Tom, Dick and Harry, because it was perceived to be too risky, and might place too great a strain on the capital adequacy of the institution.

Then interest rates began to decline, and as they fell lower and lower, it became much harder for lending institutions to make any money from simple interest alone, because it was at a very low number, and in any event, there were beginning to be lots of other competitors out there waiting to offer services, if the traditional institutions declined.

Banks had also learned a very interesting fact, which made the relaxation of their lending policies even easier. Some clever statisticians worked out that in the UK at least 88% of people always paid back their debts! It seems that the thought of being made bankrupt still possessed a real stigma for a great number of citizens, and ensured that they would repay their debts in full.

Suddenly, a whole new vista of lending possibilities opened up. Instead of worrying whether individuals were worth lending to, it now made sense to get them into as much debt as possible, as quickly as possible. You see another thing that the statisticians discovered was that a large number of people tended to stay with the first banking institution they started with, no matter how badly or inconsiderately the bank treated them. Moving an account was just too much trouble, and the vast majority of people would put up with bad treatment as long as they could get some form of banking service.

So the banks began to engineer all sorts of new lending possibilities. Credit cards for students, no problems. Loans, why not? Guaranteed overdraft facilities, of course! Interest repayment holidays, certainly! Anything to get clients into debt, debts that incurred higher rates of interest, secure in the knowledge that over the long term, those debts would be paid in 88% of cases, and at enhanced rates of interest.

In fact, it got so lucrative a business that the banks soon started to look round for other sectors to lend to. The possibilities were endless, and the banks pushed their lending teams hard to get the cash out onto the street. Unpaid debts, not to worry! County Court judgements, let’s see how we can help! maxed-out credit cards, let us lend you even more money just to pay them off! They were now lending vast sums of money to people you wouldn’t trust to take your dog for a walk, in the hope that he would be brought home again in one piece!

Then another wise-guy came up with a clever idea. When lending money to punters (sorry, valued clients), why not encourage them to think long-term. Why not interest them in a single premium insurance policy which if they were ever to suddenly experience a set-back, their debts would still be paid by the insurance policies?

This one was really clever, because the banks then loaned the money to pay for the single premium as well, while ensuring that the terms and conditions of the insurance were so carefully constructed that the likelihood of ever successfully utilising the policy was almost illusory! The banks then leveraged those insurance policies with another insurer!

If the punter then did default on the loan, the bank would be able to claim on the policy. It all seemed like money for old rope!

Finally the really clever derivatives chaps came back again with another idea. Why not take all these debts, which will be repaid at some date in the future, but parcel them all together, and then sell those debts in a securitised form to other investors. In this way, the bank can make another turn on its investment and minimise its risk on the debts.

Suddenly the market in credit derivatives became the only game in town. Packages of debts were re-packaged, sliced, diced, cut laterally, split lengthways, re-packaged, re-sold, and re-packaged again. The ability to calculate the financial return on these debts, which by now had become something akin to a form of bond, lay in the hands of the clever boys and girls with the Ph.Ds in astrophysics and quantum mathematics. The rest of the wise-guys merely sold them, again, and again and again, and cleaned up on the commissions and made their bonuses, and kept their sales-managers happy!

The problem was that by now, no-body knew where the risky debts, the more risky debts, or even where the debts defined as ‘toxic waste’ were, and even more important, when and how these debts would be repaid? Just as long as the market sentiment in the worth of these products remained strong, all well and good, but when the market started to look at these products through jaundiced eyes, then the whole edifice began to tremble, then to shake and finally, to wobble.

The problem is that no-one now really knows where or how much of the financial market may be exposed to these risks. We do know that a very large number of institutions have been engaged in what had been a very lucrative market, we know this because informed commentators have been warning about the lack of transparency involved in the credit derivatives markets, for a long time, and for just as long a time, the Regulators, who should have really been minding the shop, have been making vague noises about their concerns about the perceived risks involved.

It was all like playing a global game of pass the parcel, and just hoping and praying that you weren’t the one left holding the package when the music stopped!

Well, the music stopped in the US, when the realities of the level of speculative lending to the sub-prime market became too obvious to ignore any more. This has had a direct knock-on effect in the UK, and those who had followed the various commercial lending and borrowing practices engaged in by Northern Rock, pointed the finger at the institution as a prime target for concern.

The rest is all too awful to contemplate.

The realities of the outcome are to be measured in the length of the queues lining up outside Northern Rock offices demanding their money back. Even after the Bank of England, (rather rashly) guaranteed their continued existence, and even when the Government stepped in to assure investors that Northern Rock was secure, no-one among the investors was really listening.

The lessons to be learned from the fall-out of this event are salutary.

First of all, it demonstrated beyond peradventure that the good reputation of a financial institution is an insubstantial thing once the clients become worried about the security of their deposits.

Clients no longer have any loyalty for any financial institution because they have been treated so badly and with such total disregard for their interests in recent years. The banks have ridden roughshod over their client’s concerns and now they must pay the price when the going gets tough.

Clients are used to seeing their local branches close; never being able to speak to someone who can answer their questions; having to discuss their financial affairs with someone in Mumbai; being badgered to take out a myriad number of insurance products every time they put their head round a branch doorframe; and being ripped and gouged by their bank in costs, hidden charges and grotesque penalty fees.

When a client no longer has any loyalty to the institution with whom he banks, he will not hesitate to get his money out when the fickle finger of fate points in his bank’s direction.

Secondly, it should have proved to Gordon Brown and his financial whizz-kids in the Treasury that the greatest number of people no longer believe a word the Government says about anything. When the Bank of England put its support behind Northern Rock, it suddenly became the safest institution in the country. This has not stopped people from getting their savings out, and selling their shares.

Statements of government support became a meaningless echo, as a vast number rushed to divest themselves of their exposure to Northern Rock’s sinking reputation. The Government was not managing the crisis.

Any government whose word is worth as little as Gordon Brown’s has clearly proven to be, is a government with a credibility crisis, but then, as with the financial institutions, the ordinary man and woman in the UK has watched and listened while this Government has lied and twisted and squirmed and spun and lied again about so many issues, that no-one of any ordinary common sense believes a word they say!

So, let us hope that important lessons will be learned from this mess.

Traditional financial crime, money laundering and terrorism will never cause the same level of threat to a financial market that the abuse of one misplaced derivative product will achieve!

Regulators need to re-learn the lessons of previous times, and spend more time watching the activities of those who have most to gain from the propagation of these exotic products as a means of driving the debt/dependency culture; and act more decisively with regard for better and greater transparency in their application.

Both Government and the financial sector need to act swiftly and decisively to start re-building investor trust and confidence in the sector which we are told is so important to the future well-being of this country. Saving, thrift and self-reliance need to be encouraged; promoting debt and financial dependency is to be discouraged. Savers and investors have been screwed shamelessly by Threadneedle Street and Whitehall both for too long, and this is where the real financial crime has occurred