StanChart’s Reverse Ferret and the Indomitable Dimon

So Standard Chartered did launder Iranian money. After huffing, puffing, denying, blaming jealous Americans, and even having the British government argue on their behalf, they were quick to pull a reverse ferret and cut a $340 million check to make their legal problems go away. It’s extraordinary, and rather dispiriting, how rarely banks fight for their innocence.

A reversing ferret

(The ferret term comes from Fleet Street. Kelvin MacKenzie, a former editor of The Sun used to refer to pursuing a public figure as putting a ferret up their trouser leg. When the attack had to be recalled, he’d shout across the newsroom “reverse ferret!”).

More amusingly, Jessica Pressler has a great interview with Jamie Dimon of JPMorgan Chase in the latest New York magazine. Whatever you think of Dimon, he makes good copy. Some highlights:

“There are huge benefits to size,” he says instead, a distinct air of tired-of-this-shit creeping into his voice. “We bank Caterpillar in like 40 countries. We can do a $20 billion bridge loan overnight for a company that’s about to do a major acquisition. Size lets us build a $500 million data center that speeds up transactions and invest billions of dollars in products like ATMs and apps that allow your iPhone to deposit checks. We move $2 trillion a day, and you can see it by account, by company. These aren’t, like, little things. And they accrue to the customer. That’s what capitalism is.”

“Everyone is talking about the culture, the culture, and all that, and it’s just not true,” Dimon says. “Most bankers are decent, honorable people. We’re wrapped up in all this crap right now. We made a mistake. We’re sorry. It doesn’t detract from all the good things we’ve done. I am not responsible for the financial crisis,” he adds. “I hate to tell you. We were a port of safety in the storm. I find it unbelievable that that is the general theme—that you have to walk in a room and act like you are responsible for things you are not responsible for.”

“I’m an outspoken defender of the truth,” he corrects me. “Everyone is afraid of retaliation and retribution. We recently had an event with a hundred small bankers here, and 85 percent of them said they can’t challenge the regulation because of the potential retribution. That’s a terrible thing. Okay? This is not the Soviet Union. This is the United States of America. That’s what I remember. Guess what,” he says, almost shouting now. “It’s a free. Fucking. Country.


Standard Chartered – the banality of evil

Standard Chartered has always been one of banking’s also-rans, unglamorous, plodding and banal. Citibank without the excitement. But perhaps we should have paid attention when it appointed a former High Sheriff of Nottingham as its chairman in 2009. Sir John Peace now sits atop an enterprise whose alleged criminality would have delighted King John.

John Peace and his predecessor

StanChart’s alleged plan was simple: take the dirtiest money around and clean it up for profit.$250 billion of sanctioned Iranian cash was pushed through StanChart’s US accounts over the past decade in what the New York State Department of Financial Services called “willful and egregious violations of law”.

Now the investigators are examining evidence suggesting StanChart was pulling the same trick with money from similarly sanctioned regimes: Libya, Sudan and Myanmar.

It is well worth glancing through the official statement about StanChart’s activities.

It alleges that  the company’s senior executives were well aware of what was going on – certainly at the Group Executive Director level – and chose to press ahead. In 2006 the then CEO of the Americas emailed his bosses in London to warn of the risk of “very serious or even catastrophic reputational damage to the Group.” He was allegedly told: “You fucking Americans. Who are you tell us, the rest of the world, that we’re not going to deal with Iranians?”

And so it came to pass. StanChart systematically cleared dollars for Iranian clients, scrubbing away evidence of the origins of the money. This was how they would grow their Iranian business – by ignoring regulations which got in the way. StanChart’s lawyers and senior executives are said to have done this in full knowledge that they were breaking the law.

No grey areas here. No complex derivatives or murky LIBOR-fixing. None of the seedy brilliance of Goldman Sachs. This was no different from Tony Soprano running the Bada Bing strip club to launder his mob money.

Soprano and Sands – the Bada Bing Twins

If I were Peter Sands, the chief executive of StanChart, or indeed any of the senior executives or board members, I’d be ensuring quick passage away from the long arm of US extradition law. If he did know about the laundering, he’s a crook. If he didn’t, he was negligent and an awful judge of the character of those he managed.

The maximum penalty for what StanChart appears to have been up to is double the amount of money laundered, which would sink the bank, and or up to 20 years in prison.

Adair Turner, the current head of Britain’s Financial Services Authority served as a non-executive director at StanChart from 2000-2008, when the alleged criminal activity was well under way. Could this end his chances of being the next Governor of the Bank of England? 

What’s important to recognize here is that this isn’t your common or garden financial crisis malfeasance. This isn’t LIBOR fixing, or the sale of dodgy credit instruments to Germans who should have known better. These charges, if true, are flat out criminality. Old fashioned, Swiss-banker style concealment on behalf of some of the world’s nastiest ne’er do wells, executed by a second-rate bank desperate to increase revenues and profits whatever the means.

StanChart stands accused of knowingly offering financial services to leading citizens in some of the most appallingly run countries in the world. They made money by encouraging the imprisonment of dissidents, the repression of women, religious intolerance, and if the Sudan charges are true, genocide.

None of this is mentioned in its brand and values statement:

“By doing things the right way, we can support our customers and clients while having a positive impact on the wider economy.”

Peter Sands has been portrayed as the good man of British banking. A former diplomat and management consultant, he guided his bank through the financial crisis without need for a bail-out, and even helped the British government come up with a solution to bailing out RBS, HBOS and Lloyds.

In an interview with the London Evening Standard last year, his novelist wife, Betsy Tobin, defended him: “If there’s a sweet spot in banking, Peter’s in it. Yes, he’s the good banker, the one who has run a profitable bank throughout the past few years and didn’t take government money, and indeed helped the government out when they needed it.”

Sands even gave his 2010 bonus of £2 million to charity.

He may want it back to help with his legal bills.