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Wednesday, 8 August, 2012
Standard Chartered shares plunge on laundering charges
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NEWS DESK
HARES of Standard Chartered have tumbled despite the bank denying allegations that it illegally “schemed” with Iran to launder money. Shares were down 20% by lunchtime in London, after falling 16% in Hong Kong. The UK-based bank laundered as much as $250bn (£161bn) over nearly a decade. It said the bank hid transactions for “Iranian financial institutions” that were subject to US economic sanctions. The regulator said that Standard Chartered had hidden 60,000 such secret transactions. However, the bank that it “strongly rejects the position or portrayal of facts as set out in the order” issued by the regulator. ‘Not a full picture’: The US regulator labelled UK-based Standard Chartered a “rogue institution” and ordered the bank to “explain these apparent violations of law” from 2001 to 2010. It accused Standard Chartered of falsify-
Sudan’s pounds rise after oil deal with S. Sudan
ing payment directions by stripping the message of unwanted data that showed the clients were Iranian, replacing it with false entries. “It provided step-by-step, wire-stripping instructions for any payment messages containing information that would identify Iranian clients,” the complaint said. The regulator also said that it would hold a formal hearing over the “assessment of monetary penalties”. The bank, which currently only operates in the US in New York, has also been threatened with having its New York banking licence revoked. The regulator also pointed the finger at consultancy firm Deloitte, suggesting it could have aided Standard Chartered in its alleged deception. accouNt freeze: Standard Chartered also said the order issued by the US regulator did not present “a full and accurate picture of the facts”. It said that it had conducted a review of its transactions, primarily those relating to Iran for the period between 2001 to 2007, and had given regular updates to
the US authorities on the results of the investigation. “As we have disclosed to the authorities, well over 99.9% of the transactions relating to Iran complied with Uturn regulations,” the bank said. “The total value of transactions which did not follow the U-turn was under $14m.” The so-called U-turn transactions are those started outside the US by non-Iranian foreign banks that pass through the US financial system on the way to other non-Iranian foreign banks. To ascertain whether these transactions are permitted or not under current regulations, US clearing banks use the wire-transfer messages they get from the banks involved. If the banks do not have enough information, they are supposed to freeze the assets. Senior management were also said to have codified their illegal procedures in formal operating manuals, including one labelled “Quality Operating Procedure Iranian Bank Processing”. Penelope Lepeudry, managing director of Kroll Advisory Solutions, a consult-
ing firm specialising in financial investigations, told the BBC that “if the allegations are confirmed, this is a very serious development”. other SchemeS fouNd: The regulator said it had also uncovered evidence with respect to what are apparently similar schemes to conduct business with other countries under sanctions - Libya, Burma and Sudan. “Investigation of these additional matters is ongoing,” it added. The regulator said that its nine-month investigation, which involved looking through more than 30,000 pages of documents, including internal bank emails, showed that the bank reaped “hundreds of millions of dollars in fees”. ‘StaggeriNg cover-up’: In numerous emails going back as far as 1995,
NAB gives three days to telecom companies in tax evasion case ISLAMABAD
NA body directs FBR to control smuggling of plastic granules APP
KHARTOUM AGENCIES
Sudan’s currency rose against the dollar on the key black market on Monday for the first time in several months after the government reached an agreement with South Sudan on oil fees, dealers said. The Sudanese pound has been in freefall since South Sudan took away threequarters of oil production when it became independent a year ago, creating an economic crisis in Sudan. As well as being a major source of revenue for Sudan, oil also provided dollars badly needed for imports. As the currency has plunged, annual inflation hit 37.2 percent in June, more than double the level of a year earlier and due mainly to the higher cost of imports as the country imports much of its food. High inflation has triggered small anti-government protests. Sudan and South Sudan agreed at the weekend on how much the landlocked new nation has to pay to route its crude through northern pipelines, ending a row that led to the shutdown of the entire southern output of 350,000 barrels a day in January. Black market traders said the Sudanese pound had risen to rates of between 5.7 and 5.9 to the dollar, compared to 6.2 last week on hopes that oil flows bringing in dollars would resume soon. Current rates are still well below the official rate between 4.3 and 4.7. “It’s so far psychology,” said one dealer, adding that dollar supplies had also increased because many Sudanese working abroad had returned to visit their families during the Muslim holy month of Ramadan. “It remains to be seen whether the dollar supply situation will really improve,” the dealer said. The central bank devalued the pound last month by almost halving its value to try bridge a gap to the black market rate, which has become the benchmark for companies. It is not clear when South Sudan’s oil exports through Sudan will resume as Khartoum is insisting on reaching a border security deal first, a tricky issue as both sides accuse each other of supporting rebels in the other’s territory.
The National Assembly (NA) Standing Committee on Finance directed Federal Board of Revenue (FBR) to control smuggling of plastic granules (dana) into the country and called for taking appropriate steps in this regard. Chairing the committee, Khawaja Suhail Mansoor said that loss of billions of rupees had been incurred due to the smuggling. “More than 20,000 bags of Plastic granules per day were being smuggled from Iran to as deep as the city of Lahore but FBR has not taken any step against the menace,” he added. The committee also suggested that a directive should be issued by FBR to officials deputed at Lahore office to take action against the issues and if the appropriate action is not taken by the con-
Courtesy: BBC News
Countdown to investigation
BRING ON THE PLASTIC SMILES! ISLAMABAD
Standard Chartered’s lawyers advised on ways to go about circumventing US sanctions. In March 2001, the bank’s legal adviser counselled that “our payment instructions [for Iranian clients] should not identify the client or the purpose of the payment”. Among the violations of the law, the bank is accused of: 8 falsifying business records 8 failing to maintain accurate books and records 8 failing to report misconduct to the regulator in a timely manner 8 evading federal sanctions The US Treasury, which implements the sanctions, said that it treated violations “extremely seriously”.
cerned officials, the staff should be replaced. It was also directed to FBR that the awareness should be made regarding Plastic granules among the public to support the officials. “The FBR is doing its the best to control such menace, besides we are facing resources constraint and shortage of staff deputed there, Custom FBR Member “, Muhammad Riaz said while speaking in the committee. The FBR will use its all resources available to control it, he said while assuring the committee. The committee directed FBR to come up with viable proposals to the Standing Committee for its support to increase the capacity in order to improve the performance of Directorate of Intelligence and Evaluation and the Committee also directed the FBR to gear up its efforts to control the smuggling especially on the borders of Iran and Afghanistan with Pakistan.
ONLINE
In Rs 47 billion tax evasion case, the National Accountability Bureau (NAB) has issued notices to five telecom companies to appear before investigation team on August 9, 2012. Under section 25 (a) of National Accountability Ordinance (NAO) 1999, NAB has highlighted the option of Voluntary Return (VR) to these telecom companies and has given three days dead line to pay their liabilities along-with default surcharge and penalty as determined by tax authorities. Through these notices the companies have also been informed that in case of failure this option of VR will no more be available and these telecom companies will have to opt for Plea Bargain under section 25(b) of NAO with all punitive measures under NAB Ordinance. On July 11, 2012 NAB summoned five telecom companies (National Telecommunication Corporation (NTC), Pakistan Telecom Mobile Company Ltd. (PTML), Telenor, Pakistan Mobile Communication Ltd. (PMCL) and Warid) for recording of their statements in the case. NAB investigation team had taken over relevant record into custody from FBR’s Chief Commissioner Large Tax Unit.
Is importing urea economical for Pakistan? Government’s spending on import of agriculture input touches $1.1bn g Imported urea retailed at Rs2851 per bag, up 48pc from Rs1483 of locally manufactured g Cash-strapped government’s subsidies on imported urea stand at Rs40bn g Manufacturers say imports nothing but short sightedness of government g Industries suffering from gas scarcity that cut its production capacity to 4.3mn from 7mn tons g
KARACHI ISMAIL DILAWAR
The resource-constrained Government of Pakistan seems least bothered to behave frugally when it comes to spending the hard-earned but still insufficient dollars it reserves as foreign exchange in the national kitty. This is evident from the fact that whereas the huge $ 40 billion imports in FY12 widened the cash-strapped country’s trade balance to a massive $ 15 billion, Islamabad still tends towards throwing billions of dollars after fertiliser imports instead of capitalizing on domestic sources offering relatively economical options. During the year under review the country could export goods worth only $ 24.6 billion, down $ 701 million compared to $ 25.3 billion of last financial year. This mammoth trade deficit in last fiscal year expanded the country’s current account gap to a whooping $ 4.5 billion against a $ 214 million surplus in FY11.
The economic observers agree that given the prevailing pressure on external front, the funds-starved government should be more averse to imports and take necessary steps to increase in declining exports. The government is doing the contrary, however. Whereas lower than expected monsoon rains have made the environmentalists foresee an economy-crippling drought in coming months and the local producers are warning of a serious demand-driven fertiliser crisis in the gas-scarce country, the government is all out to go for capital-intensive shortcuts like importing the farm essential that, it believes, cannot be managed easily at home. Having imported fertiliser worth over $ 600 million so far during this year (CY12), the dollar-starved economic mangers are intent to import more of the agriculture input worth $ 500 million in the months ahead. According to industry sources, the imported urea is much more expensive than what is produced locally. Each bag costs
the farmers Rs 1,368 or 48 percent more. They said the Trading Corporation of Pakistan, in its May 21st tender, retailed each bag of the imported urea at Rs 2,851 compared to Rs 1,483 of that manufactured in Pakistan. This vast gap in prices has been bridged by the subsidy-prone political government through subsidising the imported commodity to the tune of Rs 40 billion, approximately. The fertiliser manufacturers claim to have provided a benefit of Rs 504 billion to the inflationstricken farmers by offering cheaper urea during last five years. “This benefit is because locally produced urea is nearly half the price of imported urea and the industry passed this saving on to the farmers,” said a manufacturer. “This is the short-sighted approach of the government to have been tilted more towards the imported fertiliser,” viewed of Engro Corporation President and owner of Engro Fertilisers Muhammad Aliuddin Ansari. Ansari in a recent talk with a group of selected journalists, said
if not done away with this imports-centric logic would soon make the country end up with importing even food items like wheat. “To me, this is the greatest danger for Pakistan as the day our food security exhausts we would have to go for food imports that would put us in a sort of vicious circle,” he noted with concern. In fact, the Engro chief said, the cashstrapped government was going for options that could provide it with some space in terms of payments. “Since the imported urea is bought on credit the government is opting for it, but what when this credit limit would exhaust?” he asked and replied “Your farmer would be without fertiliser (that is) a basic agriculture input.” The current demand for fertiliser, a critical ingredient for agricultural productivity that contributes 21 percent in the country’s Gross Domestic Product, ranges from 5.5 to 6 million tonnes against the 7 million tonnes installed capacity which has nosedived to 4.3 million tonnes due to gas curtailment to the manufacturers.