Sang Tan/Associated PressStandard Chartered’s London headquarters.LONDON — Standard Chartered, the British bank accused of covering up billions of dollars of sanctions-busting transactions with Iran, has come out fighting against the allegations.
In the court of public opinion, banks these days are assumed to be guilty until proven innocent, a perception reinforced by a sorry procession of banking executives mumbling excuses for transgressions that fueled the financial crisis and distorted supposedly free markets.
There were no excuses from Standard Chartered, however, on Monday after the New York State Department of Financial Services claimed that the bank’s alleged illicit dealings had left the U.S. financial system “vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes.”
Instead, the bank said it “strongly rejects” the position taken by the state’s top banking regulator and denied any dealings linked to terrorists, insisting it had ceased all new business with Iranian customers five years ago.
My colleague Jessica Silver-Greenberg provides a full account of the allegations against Standard Chartered and the bank’s response.
But whatever the outcome of investigations of the alleged money-laundering at the bank, the charges against Standard Chartered have reignited another debate that focuses not on banks, but on the extra-territorial reach of U.S. legislation.
Allister Heath, writing on Tuesday at the London-based City A.M., said there was no defense for wrongdoing by any British bank operating on Wall Street that broke U.S. law. But he warned of the threat of further extending the reach of U.S. law.
“There is a risk otherwise of extreme extra-territoriality and of the U.S. imposing its foreign policy on every single foreign company that has dealings with any U.S. citizen, let alone that has U.S. operations,” Mr. Heath wrote.
He even suspected a hidden motive in the Standard Chartered affair. “It will also fuel fears … that the U.S. has it in for the U.K. and that it is now trying to put the City back in its place.”
The charges may also prompt a re-examination of the scope and utility of sanctions against Iran.
Like the United States, the European Union has its own strict sanctions against financial dealings with Iran. The measures have been put in place in the absence of wider international consensus within the United Nations Security Council on using sanctions to halt Iran’s perceived efforts to pursue a nuclear bomb-making capability.
The sanctions issue is nevertheless a much hotter public issue in the United States than among Europeans, even inserting itself into the 2012 presidential election campaign.
Jennifer Rubin, a conservative American blogger, accused the Obama administration of belatedly rushing though fresh Iran sanctions at the end of last month primarily in response to the success of a visit to Israel by Mitt Romney, the Republican contender.
There is also an active American lobby in favor of pressing foreign companies to cut remaining ties with Iran.
Standard Chartered was itself among the targets of a “name and shame” campaign by United Against Nuclear Iran (U.A.N.I.), a non-profit group headed by Mark Wallace, a former U.S. ambassador to the United Nations.
U.A.N.I., which gave Standard Chartered a clean bill of health in May after it pulled out of Iran, returned to the attack on Monday by saying the penalties the bank now faced in the light of the latest allegations “should serve as notice to all entities and financial institutions that they will be held accountable for their business with such an unscrupulous regime.”
The pro-sanctions lobby can certainly argue that the measures against Iran are having an impact. The Iranian currency, the rial, is in free fall as the country braces for a fresh devaluation brought on by the economic restrictions.
But will the economic hardships of the Iranian people encourage the regime to change track on the nuclear issue?
Leon Panetta, the American secretary of defense, has insisted sanctions against Iran were working, even if “the results of that may not be obvious at the moment.”
Iran regards the U.S.-led sanctions as illegal and the Tehran Times recently accused Washington of “heavy-handed bullying” of other countries that were harming their own interests by joining its sanctions regime.
Innocent or guilty, the last thing Standard Chartered needs right now is sympathy from Tehran.