Standard Chartered and Iran

Banking for the bad guys

 

 

 

 

 

 

IN A bombshell statement New York’s Department of Financial Services added Standard Chartered, a British bank, to the rank of financial institutions under siege, calling it a “rogue institution”. It accuses Standard Chartered of executing 60,000 secret transactions worth $250 billion for Iranian customers in exchange for “hundreds of millions of dollars” in fees. In a footnote the regulator also says that there is evidence of similar “schemes” with other countries subject to American sanctions, including Libya, Myanmar and Sudan.

In the 27-page document, tied to an order to appear at a hearing on August 15th, the department quotes a panicked e-mail by Standard Chartered’s chief executive officer for the Americas from 2006. The activities have the “potential to cause very serious or even catastrophic reputational damage to the group” as well as “serious criminal liability”, he wrote. In response, according to a branch officer, an unnamed “Group Executive 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?”

Included in the order are allegations that Standard Chartered’s “deception was apparently aided by its consultant Deloitte & Touche…which intentionally omitted critical information in its ‘independent report’ to regulators.”

As a consequence of the charges, Standard Chartered risks having its New York state license revoked—in essence being tossed out of America. It could also be required to answer charges and submit a plan for independent monitoring of its global transfer of funds by an entity selected by American regulators—a move unlikely to be welcomed by many of the emerging-market countries that are at the heart of Standard Chartered’s global operations.

Some of the information in the order echoes charges contained in a Senate report on money laundering by HSBC, particularly the stripping of key identifying information from wire transfers. This scrubbing took place between 2001 and 2007, when international sanctions against Iran were largely limited to America.

That Standard Chartered’s deceptive transfers went through undetected, the filing says, “stems from the documented willingness of its most senior management to deceive regulators and violate U.S. law.” A strategy was drawn up as early as 1995, when the then President Clinton announced sanctions against Iran. Its aim was to get around American regulations by not involving the bank’s American operations and not sending information about the plan to America.

The business became particularly appealing in 2001 because of a relationship with CBI/Markazi, an Iranian state-owned oil company that needed to process $500m a day in payments denominated in dollars. This relationship then led to business with other Iranian clients. Among the most important business partners were the Iranian state bank, and two of the country’s largest state-owned commercial banks.

Although American firms were banned from doing business with Iran, an exemption did exist for many years for “U-turn” transactions, which involved dollar transfers that came into America’s financial system and then left without staying. They did have to be disclosed, however. In 2006 American banking regulators asked Standard Chartered for information on these, but were allegedly sent only information on a limited number in an effort to deflect attention. Only in 2010, they say, were authorities informed about the scope of activity. Even then, compliance was allegedly inadequate. Much of it was outsourced to India.

Standard Chartered had been aware of the investigations, but not the timing of the disclosure nor its extent of the allegations. In a statement released on August 7th it said it was surprised to have received the order, given its ongoing discussions with the regulators, and says that the statement itself is misleading: “The Group acted to comply, and overwhelmingly did comply, with U.S. sanctions.” In a statement Deloitte Touche said that it “performed its role as Independent Consultant properly and had no knowledge of any alleged misconduct by Bank employees. Allegations otherwise are unsupported by the facts.”

Why is income inequality rising in China?

China has made huge economic progress. In 1990, income per capita in the richest country in the world (for which data are available) was 46 times that of China. In 2010, income per capita in the richest country was only 10 times that of China. Indeed, China is no longer considered a lower-middle-income country; the World Bank recently reclassified it into the upper-middle-income category.

Despite this remarkable success, income inequality is rising within China. This is not altogether surprising. In the 1950s, economist Simon Kuznets argued that, as a society develops from an agricultural society into an industrialized one, inequality within that society grows. Average earnings of industrial workers increase relative to those of farm workers. As development continues, inequality among industrial workers also increases. As a society moves into the more advanced stage, the government begins to help redistribute the wealth—through the tax and transfer system as well as through funding universal education—which leads to a decline in inequality. Kuznets described this progression of inequality as an upside-down U curve—starting low in an agrarian society, rising as industrialization occurs, and finally falling as the society becomes more advanced.

Kuznets’ hypothesis does not hold for all countries and has been criticized for ignoring other factors—such as the openness of the economy to trade, the willingness of government to intervene in the market, and the efficiency of the country’s financial sector—that also explain income inequality. While simplistic, however, Kuznets’ reasoning does appear to hold for China.

Moving as it has into large-scale industrialization, China is experiencing rising inequality; it is on the upward slope of Kuznets’ inverted-U curve. A new study by Jiandong Chen, Wenxuan Hou, and Dai Dai reveals that the key factor of income inequality comes from income disparity between urban industrial inhabitants and rural traditional workers. The ratio of urban to rural per capita income increased from 1.8 in 1983 to 3.3 in 2007. The researchers hypothesize that increased urbanization will make the national Gini index and the Gini index between urban and rural areas rise first and then decline.

For more detail: http://www.conferenceboard.ca/hcp/hot-topics/worldinequality.aspx

I found these cute pictures on the net and was really baffled by the ideas and imagination. 

CHARSADDA: When a family dispute over land degenerated into cold-blooded murder, Zaman Khan was quickly in over his head.

As cousins killed cousins, he borrowed more than 18,500 dollars to buy guns, ammunition and guards. But soon debtors were demanding repayment, leaving him so depressed he contemplated suicide.
Then a friend came up with an idea.
He took Khan to a site in northwest Pakistan which dates back to the ancient Gandhara civilisation where they dug up 18 pieces of statue, selling them to market traders for two million rupees.
After two more visits, Khan – AFP has changed the names of all those involved in the trade – had found enough statues, coins and ornaments to not only settle his debts but also bankroll his long-running feud.
Thirty years on, he presides over a lucrative trade in illegally excavated treasures, smuggled to Thailand, Europe and America as part of Pakistan’s sophisticated but underworld business in archaeological remains.
“I can fight against my enemies and my friends’ enemies now. I’ve earned millions of rupees from this business,” he said, sitting next to a dozen automatic weapons in Charsadda, 130 kilometres from Islamabad.
Pakistan is home to two ancient civilisations, the Indus, which dates back to between 2500 and 1700 BC, and the Gandhara, from 530 BC to 1021 AD. It is the Gandhara artefacts that are most highly prized.
Statues of the Buddha, Siddhartha Gautama, who was born in Nepal in the 6th century BC and whose teachings grew into a major religion, can fetch thousands of dollars across the world.
“Whenever I’m on a digging mission, I pay 10,000 rupees to the relevant police station as a bribe in advance and 1,000 rupees a day while the work continues,” said Khan.
He sells the artefacts to dealers in Peshawar.
“Then they sell them to dealers in Islamabad and other cities who then export them to Thailand,” he said.
“To smuggle it from Peshawar to Islamabad, they use ladies, who aren’t usually checked by police at the security posts.”
– ‘Each Buddha sells for $20,000’ –
Smuggler Raja Javed has customers in Peshawar, Thailand and Japan.
“I’ve been doing this business for the last 20 years. I have sold hundreds of art pieces worth millions of rupees,” he told AFP at his plush villa, just metres from the museum in the Gandharan city of Taxila.
Spread over almost an acre, the grounds of his home include lawns and guest houses, while the main residential building has the kind of huge dome usually found on tombs of Mughal kings and sufi saints.
“At a minimum I’ve sold 20 big Buddha statues (weighing 40 to 80 kilograms). Each piece sold for around 20,000 dollars,” said Javed.
He does not believe what he does should be treated as a crime, but that the government should buy artefacts at market value.
The law forbids anyone from moving or selling any archaeological artefacts – statues, gold coins, jewellery or utensils – even if they are unearthed on their own property.
“They are the property of the government,” said Mehmoodul Hassan, a senior official of the archaeology department.
“Anybody who moves or sells an artefact can face imprisonment of up to five years, or a fine of 500,000 rupees ($5,300) or both.”But in the smuggling business, it is all about who you know.
In Peshawar jewellery market, a hub for Afghan and Pakistani dealers, Javed and Khan’s main contact said: “One piece can cost up to $10 million, it depends on the quality, state and history of the particular piece.
“I can arrange dozens of precious originals and copies for you, but transportation is hard,” he told an AFP reporter who posed as a buyer wanting Buddha statues for London.
Fakes and replicas are another aspect of the trade.
In Taxila, which continues to attract foreign visitors despite the terror threat in Pakistan, one sculptor chisels Buddha statues from new stone and paints them in mud to make them look ancient.
“I can provide you copies and replicas of any statue you want” he said, showing off his handiwork. “I am an expert at making fasting Buddha and the goddess.”
– The ‘king’ of antiques smuggling –
Customs officials say they have cracked down on the smugglers.
“The whole system is computerised now and the chances of corruption are rare,” said Riffat Shaheen Qazi, a customs spokeswoman.
“Some individuals might be involved in smuggling artefacts but we’re trying to curb this menace.” But an interviewee for this article suggested the names of two people in Islamabad with a gallery in Thailand who could help transport artefacts abroad.
One of them lives in a fort-style farmhouse in the mountains between Islamabad and the summer hill resort of Murree.
Sporting a beard, and wearing a blue kurta with baggy white trousers and a yellow necklace, the man said his activities had become harder to carry out, but by no means impossible. “I smuggled antiques in my hand luggage while boarding a flight. But it has become much more difficult now. In the past, we sent a lot of huge items abroad, but now everything is scanned.”
Even so, he added: “If you want to buy anything, contact my son in Bangkok. We also have a person in London, he can serve you there, but don’t try to make a deal over here in Pakistan.” Otherwise, he suggested Afghan smugglers might be able to help. “It has been four decades now,” he said. “I am a pioneer of this business, I am king.”

Swaps Definition Takes on the World

Wednesday August 1, 2012

By David Dixon, Product Manager for Misys' Summit FT
Earlier this month, the U.S. Securities and Exchange Commission (SEC) and the U.S. Commodity Futures Trading Commission (CFTC) released the long-anticipated definition of a swap. As expected by the majority of industry participants, the SEC and CFTC sided with the wording in the Dodd-Frank Act. Although there were no big surprises in the content of the announcement, banks and financial institutions still have a huge amount to contend with on the regulatory front - including registering themselves, complying with compensation rule changes, establishing living wills and of course determining changes to their business strategy - in addition to the newly outlined definition. It may seem that the software changes necessary for this one piece of Dodd-Frank are a small part of the overall picture. However, having the right technology in place plays a big role in being compliant and running an efficient business.

Industry Implications

The compliance clock started ticking on July 11, 2012, when the definition was announced to the public, but the onset of the regulations was realized long ago. From our experience, and speaking with our clients, the most difficult element of complying with the new definition is the short timeframe - just 60 days to implement in some cases - setting the deadlines as early as this September.
Much of what banks and financial institutions need in terms of software solutions is available today, however to implement and to test these systems takes more time than is currently at hand. In addition, there are elements of Dodd-Frank to come that will affect areas of the solution previously implemented, e.g. trade reporting will come into effect in September, but the requirement to use legal entity identifiers (LEIs) will come to fruition at the end of the year. This adds additional pressure on firms and further complicates the software update process.

Prioritizing Updates

Over the next few months, there will be a huge scramble in the industry, as a multitude of regulations go into effect at different times before the end of the year. The process is akin to buying the latest computer and almost immediately a newer, faster version is available. Similarly, deciding at what time to implement new compliance software when you know there are future regulations, bringing additional changes, adds a level of complexity to any decision. Firms have to draw the line somewhere and the ultimate decision will be made based on different implications at each organization.
In addition, as the deadline is fast approaching, short-term fixes have to be more tactical, while strategic solutions will be implemented down the line. It's not possible to get everything done at once and firms have their plates full.

Global Impact

Although the SEC and CFTC's announcement concerns only Dodd-Frank and the U.S. market, the implications are global. As there is a general drive for regulatory harmonization across the world to avoid potential regulatory arbitrage, it would be safe to assume that the rules will look similar across the globe. Therefore, banks and financial institutions need to be prepared to handle similar regulations in other regions.
U.S. banks are well advanced in their planning, and European organizations are close behind, however, in Asia, where there are a lot of different jurisdictions, regulations and deadlines are less certain. We still continue to see little interest regarding the SEC/CFTC definition from firms in Asia. This firstly raises the issue of whether businesses will move to Asia as a consequence of less regulation in that area. The second concern is whether Asian firms are prepared for when the U.S. regulations will take effect.
These are big issues that banks will need to contend with over the next few months. But there is a third consideration. Even before Dodd-Frank there was pressure to globally consolidate software systems; with Dodd-Frank this continues in order to get the benefits of consolidated reporting, increased globalization and to allow greater risk controls. If firms update to comply with this definition in a hurry, they risk ending up with ad-hoc systems to meet the requirements of various regions versus deploying a unified and efficient infrastructure.
Originally published by http://tabbforum.com 

Creatitvity is Simple.

Friendship is a feeling of love and affection of one person for another. This feeling of love must be reciprocated. Otherwise friendship cannot be possible. Friendship does not exist where tastes, feelings and sentiments are not similar.
The famous essayist Bacon has warned against the friendship between a very rich person and a very poor person. Economic disparity damages friendship. Thus friendship is a feeling of affection between two likeminded persons of uniform status.
It is said that a friend in need is a friend in deed. There may be many friends at the time of prosperity. But most of them desert at the time of adversity. We can examine the sincerity of a friend during our time of hardship and trouble. Only a sincere and faithful friend remains with us at the time of our trouble. All others leave us. It is very painful when our friends turn traitors.
Money is an enemy of friendship. Everybody has an attraction for money. When lending or borrowing of money is done between two friends, there is great risk. Friendship may be affected. So it is wise for true friends to avoid monetary transaction. Vanity is another element which breaks friendship. Everybody has self-respect. When a person tries to criticise his friend, their friendship is affected. So friendship must be treated very delicately.
Very often some hypocrites pretend to be friends. They are more dangerous than avowed enemies. By telling soft words they bring enormous ruin to us. A true friend never exploits. He rather surrenders. But at present, the meaning of friendship has changed.
There are many fair-weathered friends. They terminate their friendly tie as soon as their interests are fulfilled. It is very difficult to find a true friend today. It is better to establish true friendship with either a dog or an elephant. Both these beasts will remain faithful to their human friends. Today, friendship between two persons is short-lived.
Good friends exercise good influence. They always help their friends, in distress and inspire them to walk on the right path. But evil friends ruin us completely.

A new blog here...