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.

Photo: Getty
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The future of the left: The path ahead is full of challenges

Be in no doubt: the left faces a struggle for survival.

There are plenty of grounds for pessimism about the left’s prospects and they are well rehearsed.  Across Europe, social democrats are out of power and when they do manage to enter government, it is under the skirts of dominant centre-right parties or at the helm of fragile coalitions. Ageing western societies have become more conservative, immigration has driven a cultural wedge into the cross-class coalitions that once undergirded centre-left voting blocs, and austerity has ushered in a politics of security, not reform. Only those who have borne the brunt of the financial crisis and its aftermath, like the unemployed youth and evicted homeowners of Southern Europe, have swung decisively to the left, joined by relatively protected but angry older middle class liberals of Northern Europe. Even in Latin America, where the left swept the board at the turn of the century, politics is shifting to the right. Bright spots, such as municipal experimentalism in Spanish cities, or energetic liberalism in Canada and Italy, illuminate the gloom. But mostly, darkness is visible.

Is this condition terminal? Inequality, stagnant living standards and the turbulence of global capitalism generate profound political discontent. They give oxygen to progressive protest movements as well as populist reactionaries, as the convulsions in US politics show. But only a facile determinism reads off political progress from economic crisis. There is nothing to guarantee that revulsion at political and economic elites will give birth to a new egalitarianism. The left needs a clearer headed view of the political terrain that it will face in the 2020s.

Demographic change is a given. Advanced democracies like Britain will get older and the weight of older voters in elections will increase, not diminish. The gap in turnout rates between young and old is unlikely to close, tilting politics even further towards the cultural concerns and economic interests of the over fifties. Leadership credentials and economic competence matter for these voters more than abstract appeals to equality. But a generation of young people will also enter middle age in the 2020s having endured the worst of the age of austerity, with lower wages, stymied home ownership aspirations and stunted career progression to show for it. So just as 20th century catch-all parties built cross-class electoral alliances, successful political movements in the coming decades will need to secure inter-generational voting blocs. Stitching these together will foreground the politics of family and focus policy attention on transfers of wealth and opportunity across multiple generations. 

Ageing will also ratchet up fiscal pressures on the state, as costs mount for the NHS, care of the elderly and pensions. But Britain’s tax base has been weakened by low productivity, corporate tax avoidance and expensive personal allowance giveaways. In the 2020s, this crunch will loom large over fiscal policy and force hard choices over priorities. Just as in the 1990s, we can expect public disquiet at the run-down of investment in public services to mount, but this time there won’t be the same spending headroom to respond to it. The political debate currently underway in Scotland about raising income tax is therefore a harbinger of the future for the rest of the UK.

Fiscal constraints will also force the left to take seriously the agenda of economic reform opened up under the ungainly title of “pre-distribution”. Without an account of how to generate and share prosperity more equitably within the market economy, social democracy is purposeless. But it will need a far more robust and plausible political strategy for achieving these ambitions than anything that has been on offer hitherto. Technological change will not usher in a new economy of its own accord, and without the solid base of an organised working class to ground its politics, the left needs to be open to a wide set of alliances with businesses, big and small. Combining economic radicalism with credibility and popular appeal, particularly to voters who still blame it for the financial crisis, is the hardest challenge the left faces, but there is no getting away from it.

On a note of optimism, the left is currently strong in cities, from which it can build out. Diversity is a strength in major urban centres, not a weakness, and powerful city leaders endow progressive politics with governing authority. Cities are the places where new social movements are most active and much of the energy of contemporary politics can be found, even if elections are fought on wider terrain. The task is to combine a propensity to decentralise and devolve with clear national political direction. The same holds with party reform: the mass political parties of the 20th century are dead, but networks can’t fight elections, so combining openness and democratic engagement, with discipline and national purpose, is vital. 

Nick Pearce is the director of the Institute for Public Policy Research.