A propos the Patriot Act Section 311 investigation against Banco Delta Asia in Macau that caused so much heartburn for the Six Party Agreement, I described an apparent worldwide campaign of financial warfare against North Korea and wrote :
A general picture emerges.
The December 2005 Advisory [warning banks away from North Korea] appears to represent an overt politicization of Patriot Act Section 311 actions.Instead of targeting individual banks or jurisdictions for derelictions in their anti-money laundering controls, Treasury appeared to overstep its Patriot Act Section 311 mandate by telling banks overseas—in the absence of international or national sanctions or local enforcement actions—not to do business with any North Korean account holders or else suffer under the U.S. assumption that they are money laundering.
I’m speculating—and I don’t think I’m out of line here—that there were sticks brandished (i.e. threats of Patriot Act Section 311 actions).
Well, speculate no more. Reuters delivers a crate of smoking guns in its reporting on another hardliner bugbear—Cuba.
International banks shun Cuba under U.S. scrutiny
By Anthony Boadle
HAVANA (Reuters) – Heightened scrutiny of banking transactions by the United States since the September 11 attacks has led European and Canadian banks to curtail dealings with Cuba, bankers and businesses say.
The result — perhaps intended — is that Western businessmen in Havana are having nightmares moving funds in dollars to and from Cuba because banks are increasingly refusing their business.
HSBC , Barclays , Credit Suisse , Royal Bank of Canada and the Bank of Nova Scotia, also known as Scotiabank , have closed accounts of Cuban companies or reduced business tied to Cuba since last year to comply with U.S. regulations.
ING Groep NV , the first big Western bank to set up business in Communist Cuba, doing so in 1994, said two weeks ago that it will close its Havana office.
ING said it was purely a business decision, but it followed the blacklisting last year by the United States of its banking joint venture with Cuba.
“The banks don’t want to risk a fine by the Federal Reserve. Banks like ING and HSBC have much bigger fish to fry than Cuba,” said Simonato.
Scotiabank last year ended dollar transactions by the Cuban embassy in Jamaica and was criticized for bowing to U.S. rules.
The move to comply with U.S. regulations came in the wake of the heaviest penalty in banking history.
In 2004, Switzerland’s largest bank, UBS AG , was fined an unprecedented $100 million by the U.S. Federal Reserve for helping Cuba, Iran, Libya and the former Yugoslavia swap old dollar banknotes for new currency.
UBS said it had “substantially completed” its exit from dealings with Cuba, Iran, North Korea, Myanmar, Sudan and Syria by the end of last year.
Shunned by Swiss banks, Cuba has had trouble funding its U.N mission in Geneva, a European diplomat in Havana said.
Last month, Cuba complained that UBS and Panama-based Banistmo, owned by HSBC, had refused to process the payment of its annual membership fee in the Latin American parliament.
The U.S. Securities and Exchange Commission last month posted a list of companies whose annual reports contain any references to Iran, Sudan, Syria, North Korea and Cuba.
The online tool is meant to allow investors to search for businesses with ties to state sponsors of terrorism. Companies on the list were outraged because it did not make clear what were their exact ties with the five countries.
“The Patriot Act gave U.S. authorities a tool to do what they could not do before: chase foreign banks to comply with U.S. sanctions,” he said.
A note on that $100 million fine. Apparently it was related to the discovery of $650 million in brand-new US bills in one of Saddam’s stashes after the invasion—which he apparently acquired by dealing through Cuba, Libya, and the former Yugoslavia, who had got the greenbacks through UBS and traded them onward.
Presumably, Saddam was understandably nervous about his foreign bank accounts getting locked up by future UN action. So he cashed out.
Ironically, Saddam un-laundered his money, removing it from the world financial system and piling it in neat stacks in his hidey-hole to be discovered by the U.S. Army. So I’m not sure what laws were violated here.
Therefore, connoisseurs of due process will enjoy this, from the financial site Finextra :
Apparently, it is not a crime for non-US banks to trade US currency with these countries, even thought they were under sanctions, and so UBS employees had been doing this since the mid-1990′s. And, just to be absolutely clear, UBS was not charged with any criminal matters as a result of the enquiries, but was given the hefty fine primarily to demonstrate the Federal Reserve’s displeasure at its activities.
$100 million fine from Treasury for doing legal business outside U.S. jurisdiction. I’m sure UBS and the Swiss government were just thrilled.
There are two more interesting aspects to this report.
First, it confirms that Patriot Act Section 311—meant to perfect the international anti money-laundering system– is being misapplied as an instrument of policy against regimes we don’t like.
Second, other governments may finally be getting fed up with their banks being puppets in Washington’s theater of pain and are starting to go public with their objections to a U.S. program of harassment that invades their sovereignty without any transparency, due process, or effective recourse in the pursuit of unilateral American objectives that they haven’t endorsed.
Cuba is a pretty obvious test case.
Nobody likes Kim Jung Il, and Europe may be willing if not eager to go along on Iran, Libya, and Syria to keep the lid on in the Middle East, but Cuba?
Cuba, the land of sugar, sex tourism, great medical care, and the clave?
The only country in the world that maintains an economic sanctions regime against Cuba is the U.S. of A.
And pretty much the only country that is serious about harassing Cuba is the United States, which has enlisted Poland, the Czech Republic, and Britain to block an effort led by Spain and supported by Italy and Germany to normalize relations.
Threatening to cripple European banks in the service of a U.S. policy directed more at Florida’s 27 electoral votes than any legitimate financial, foreign policy, or security goal is not going to be real…popular.
Will European objections make a difference?
These days it seems the riposte to any challenge to the Bush administration is a brisk display of the middle finger by our unpopular, back-against-the-wall prez.
It will be interesting to see if the Europeans go public with objections to the PA Section 311 campaign, or just hunker down for the next year and a half and hope for better days come 2009.