Standard Chartered accused of over $250bn of illegal transactions to Iran

"You fucking Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians?"

Standard Chartered, the British bank, stands accused of having run a major operation to facilitate money transfers in and out of Iran, in violation of American sanctions against the company. The amount of money it is thought moved totals $250bn, and would have earned Standard Chartered millions in fees.

The New York department of financial services said in a statement that:

Motivated by greed, [Standard Chartered] acted for at least ten years without any regard for the legal, reputational, and national security consequences of its flagrantly deceptive actions.

The full complaint claims jaw-dropping levels of arrogance on the part of the bank. When London was informed of concerns by the head of American operations that US law was being systematically broken, the group director replied:

You f---ing Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians?

In order to facilitate the trades without being found out, the banks employees had to strip the information that the trades were coming from Iran out of the wire transfer. And when volume grew too high to manage, they automated the systems:

When SCB anticipated that its business with Iranian Clients would grow too large for SCB employees to “repair” manually the instructions for New York bound wire transfers, SCB automated the process by building an electronic repair system with “specific repair queues,” for each Iranian Client.

Once the bank realised that the heat was on, it started getting even more tricksy. It asked its auditor, Deloitte, to delete any mention of the activities from its report:

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.”

And eventually even moved their compliance department to India to forestall the regulators:

Outsourcing of the entire OFAC compliance process for the New York branch to Chennai, India, with no evidence of any oversight or communication between the Chennai and the New York offices.

What's really scary is that even the "good guys" - the people at Standard Chartered who were raising questions - reveal breathtaking attitudes towards breach of law. The head of American operations, who first told London of his concerns, is quoted as writing:

Firstly, we believe [the Iranian business] needs urgent reviewing at the Group level to evaluate if its returns and strategic benefits are . . . still commensurate with the potential to cause very serious or even catastrophic reputational damage to the Group. Secondly, there is equally importantly potential of risk of subjecting management in US and London (e.g. you and I) and elsewhere to personal reputational damages and/or serious criminal liability.

Reread that first point. He is not saying "we have broken the law, and need to stop", but instead "we have broken the law, and need to review its returns and strategic benefits to make sure it's worth doing". That is evidence of internalised corruption to a worrying degree.

The bank itself rejects "the position and portrayal of facts made by the New York State Department of Financial Services", according to its statement. Its major position is that the vast majority of its transactions to Iran were legal, and the the DFS has misinterpreted a point of law. It claims just $14m worth of transactions broke the regulations, and that it brought those to the regulator's attention as soon as it knew.

Standard Chartered had been one of the banks which made it through the crisis relatively unchanged. That looks set to change now.

Standard Chartered faces severe allegations. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Leader: The angry middle

As a sense of victimhood extends even to the middle classes, it makes Western democracies much more difficult to govern.

Two months after the United Kingdom’s vote to leave the European Union, it remains conventional wisdom that the referendum result was largely a revolt by the so-called left behind. Yet this is not the full picture. Many of the 52 per cent who voted Leave were relatively prosperous and well educated, yet still angry and determined to deliver a shock to the political system. We should ask ourselves why the English middle class, for so long presumed to be placid and risk-averse, was prepared to gamble on Brexit.

Populism has long appealed to those excluded from political systems, or from a share in prosperity. In recent years, however, its appeal has broadened to young graduates and those on above-average incomes who also feel that they have not benefited from globalisation. The sense of middle-class victimhood has become a major strand in Western politics.

In the United States, middle-class anger has powered support for Bernie Sanders and Donald Trump. The former drew his activist base mostly from young liberals. And while Mr Trump’s success in the Republican primaries was often attributed to a working-class insurrection against “the elites”, exit poll data showed that the median yearly income of a Trump voter was $72,000, compared with a national average of $56,000. (For supporters of Hillary Clinton, the figure was roughly $61,000.) It is not the have-nots who have powered Mr Trump’s rise, but the have-a-bits.

In the UK, similar forces can be seen in the rise of Jeremy Corbyn. Indeed, research shows that three-quarters of Labour Party members are from the top social grades, known as ABC1. About 57 per cent have a degree.

Mr Sanders, Mr Trump and Mr Corbyn have very different policies, ideologies and strategies, but they are united by an ability to tap into middle-class dissatisfaction with the present order. Some of that anger flows from politicians’ failure to convey the ways in which society has improved in recent years, or to speak truthfully to electorates. In the UK and much of the West, there have been huge gains – life expectancy has risen, absolute poverty has decreased, teenage pregnancy has fallen to a record low, crime rates have fallen, and huge strides have been made in curbing gender, sexual and racial discrimination. Yet we hear too little of these successes.

Perhaps that is why so many who are doing comparatively well seem the most keen to upset the status quo. For instance, pensioners voted strongly to leave the EU and are the demographic from which Ukip attracts most support. Yet the over-65s are enjoying an era of unprecedented growth in their real incomes. Since 2010, the basic state pension has risen by over four times the increase in average earnings. 

Among young people, much of their anger is directed towards tuition fees and the iniquities of the housing market. Yet, by definition, tuition fees are paid only by those who go into higher education – and these people receive a “graduate bonus” for the rest of their lives. Half of school-leavers do not attend university and, in a globalised world, it is their wages that are most likely to be undercut by immigration.

However, we should not be complacent about the concerns of the “angry middle”. The resentment exploited by Donald Trump is the result of 40 years of stagnant median wages in the United States. In Japan and Germany, median wages have not increased in the past two decades. In the UK, meanwhile, the median income for those aged 31-59 is no greater than it was in 2007, and those aged 22-30 are 7 per cent worse off, according to the Institute for Fiscal Studies.

To compound the problem, the wealthy keep getting wealthier. In 1980, American CEOs were paid 42 times the wage of the average worker. They are now paid 400 times as much. In the UK, the share of household income going to the top 1 per cent has more than doubled since 1979. Because of our hyperconnected, globalised media culture, we see more of the super-rich, fuelling feelings of resentment.

As a sense of victimhood extends even to the middle classes, it makes Western democracies much more difficult to govern, with voters oscillating between populists of the left and the right. The political centre is hollowing out. Rather than pander to the populists, we must do more to quell the politics of victimhood by addressing the root of this corrosive sense of grievance: entrenched inequality. 

This article first appeared in the 25 August 2016 issue of the New Statesman, Cameron: the legacy of a loser