Banks and other companies in the financial service sector which operate internationally have to be very aware of the regulatory regimes which have a bearing on the countries through which they transact, even obliquely.
US regulators – specifically the New York State Department of Financial Services (DFS) - have recently reached agreement on a “civil penalty” to be paid by Standard Chartered following some extremely serious allegations made against it. As has been widely reported, Standard Chartered has agreed to pay $340 million to the DFS to settle claims that it had hid transaction with Iran.
What is striking is how this action has served as a clear reminder of the international reach of US regulators.
Companies within the financial services industry can quite easily find themselves subject to the jurisdiction of US regulators, and therefore potentially subject to extremely tough penalties.
A number of actions are ongoing against banks and other companies in the financial service industry for breaching US money laundering and trade sanction laws, and against other businesses for breaching the US Foreign Corrupt Practices Act.
It is often enough that funds, emails or other forms of communication go through the US to render a foreign company subject to US regulation, and therefore liable to enforcement action by US regulators. Most international business is of course transacted in US dollars. This means that it is not at all difficult for the US to seize jurisdiction, and if those authorities are so minded, to take aggressive action, such as has been demonstrated in the case against Standard Chartered.