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Standard Chartered Scandal: “Asian Regulators Had Lost Faith in American Regulators”

Posted by Larry Doyle on August 13, 2012 8:58 AM |

I would not expect that Benjamin Lawsky, superintendent of the New York State Department of Financial Services, is receiving many invitations on the Washington cocktail circuit currently.

When Lawsky recently brought to light the alleged longstanding Iranian money laundering activities at Standard Charted Bank, he not only dropped a bombshell on the institution, he dropped an even bigger explosive into the midst of America’s largest financial regulators. Good for him and for us.

We are long overdue for somebody with a real set of balls to expose the crony capitalism that defines our domestic and international banking and regulatory system these days. 

While Standard Chartered may flail about in an attempt to defend its franchise and reputation and our financial heavyweights at the Federal Reserve, U.S. Treasury, and elsewhere do the same, I pose the following questions to all parties involved:

1. Did Standard Chartered strip the names of Iranian counterparties from their internal systems in an attempt to skirt the sanctions imposed by the United States against dealing with Iran? This is a simple yes or no question.

2. If Standard Chartered so vehemently disputes the allegation, then why are they currently negotiating a coordinated settlement of hundreds of millions of dollars?

3. When did the Federal Reserve, U.S. Treasury and other domestic regulators learn about the Standard Chartered laundromat and why weren’t they moving even more aggressively to address and stop these operations?

And the BIGGEST QUESTION of all.

4. If laundering money for entities within a rogue state engaged in international terrorist activities and pursuing a nuclear capability does not meet the standard for revoking a banking license, then just what is the standard and hurdle to undertake such action?

Seriously, if laundering  Iranian money merely generates a fine, what does a financial institution have to do to get its license revoked? Does stealing state secrets do it? How about infiltrating the Pentagon? Paying kickbacks to elected officials? Providing protection and cover for confirmed spies from rogue nations? Would any of these offenses qualify as reason to revoke a bank’s license or do all of these merely generate a fine as well?

Americans are certainly increasingly aware that our financial regulators and our financial regulatory system are held captive by the global banking system as a whole. That fact does little to renew the confidence needed to move our economy forward. Who else has lost confidence in our regulators? Let’s look eastward as the Financial Times highlights this morning,

A few years ago, a StanChart banker told me in my office that one result of the 2008-09 financial crisis was that Asian regulators had lost faith in the wisdom and judgment of American regulators.

That statement speaks volumes and is testament to the serious price we all pay for the deeply embedded Wall Street-Washington Incest that continues to define our economic landscape.

Navigate accordingly.

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

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