As the story goes, Meng Wanzhou was arrested at the Vancouver (Canada) airport Dec 1, 2018, on her way from Hong Kong to Mexico City and ultimately Buenos Aires. Her arrest was based off of the accusation that she had lied to the HSBC executive at a 2013 meeting meant to reassure the bank that Huawei was not violating US sanctions against Iran. Meng Wanzhou CFO and Ren Zhengfei CEO of Huawei have maintained that Huawei was not in breach of any sanction, stating that the Iranian company Skycom was a local partner in Tehran and not a Huawei subsidiary. In addition, they have maintained that they have evidence in email correspondences with HSBC, that it was aware from the very start the nature of Huawei’s relationship to Skycom, and therefore the accusation by HSBC that the bank was deceived is completely unfounded. Though none of the transactions allegedly occurred in the US, it is being claimed that the US has jurisdiction due to money allegedly passing through the US banking system.

This case has proved to be odd for a number of reasons.

It is the first time in history that a non-US person is being charged for violation of US sanctions and the first time a non-US person has been criminally charged solely for having ‘caused’ another non-US entity, in this case a bank, to violate US sanctions. In addition, when charges of this sort, having to do with sanctions, are made it is typically done against the institution and not an individual. The thought that Meng Wanzhou’s arrest is meant to be used as leverage over the trade war and Huawei’s future business dealings is thus not unfounded.

According to HSBC, its hand was forced into providing ‘intel’ for Meng Wanzhou’s arrest, since its holdings were being monitored by the DOJ. HSBC, who is far removed from innocence in its personal practices, was under this monitorship for the very fact that it had been found guilty of consistent shady dealings which included several of their high level staff being charged with criminal activity. In 2016 Mark Johnson, a senior British banker of HSBC, was arrested at a New York City airport for currency benchmark rigging. Stuart Scott, also a senior British banker and former head of the HSBC foreign exchange cash trading for Europe, the Middle East and Africa, was also charged. HSBC was fined $6 billion in 2015 over this scandal. In 2018, former director at HSBC Private Bank Suisse in Geneva was found guilty and fined $229,000 for money laundering in a Paris drug case. Also in 2018, HSBC was being investigated for tax evasion and money laundering and had actually publicly released that it had a provision of $632 million ready for a future fine and that they were cooperating fully. No need to waste anyone’s time with denial hmm?

However, nothing beats the 2012 allegations against HSBC itself of allowing terrorists to move money around the financial system  and for which it had to pay a record $1.9 billion, with no form of regulated control on the bank afterwards but rather an agreement with the DOJ that the bank itself would install a 5 year independent monitor. HSBC managed to avoid being criminally prosecuted, a move that could have stopped the bank from operating in the US.  Lanny Breuer, assistant attorney general at the time, stated:

“ HSBC is being held accountable for stunning failures of oversight – and worse…that led the bank to permit narcotics traffickers and others to launder hundreds of millions of dollars through HSBC subsidiaries and to facilitate hundreds of millions more in transactions with sanctioned countries.”

This just scratches the surface, and makes you rather wonder why Meng Wanzhou is being given such a hard time when actual support of terrorist funding is merely fined in the case of HSBC.

HSBC in a “challenging global environment”

Since providing ‘intel’ against Meng Wanzhou, HSBC has been busily working to repair its relationship with the Chinese government. In early August, its chief executive John Flint of the HSBC headquarters in London was asked to step down due to a change in leadership needed to address a “challenging global environment”. Shortly after, its Greater China Chief Helen Wong also stepped down. It is no surprise that HSBC is feeling rather nervous since China is preparing a widely anticipated “unreliable entity list” of companies that have undermined China’s national interests, which was initiated as a response to the US crackdown on Chinese tech companies but also includes those who ignore or challenge the one-China principle. This would include supporting arms sales to Taiwan, and supporting violent protesters in Hong Kong.

HSBC has a lot to lose if its relationship to the Chinese government falters.

In 2017, the first joint venture securities company majority owned by a foreign bank, HSBC Qianhai Securities Limited, was formally opened for business in China. Though this was a great achievement by HSBC, its foreign majority ownership is a mere 51%, which could be easily taken away if they were considered at any point to be unfit for that level of responsibility.  Recently, HSBC has also carried out the first transaction in yuan-denominated blockchain letters of credit. HSBC’s position at the forefront of facilitating blockchain trade in the yuan promises a way into a major market, with China-related trade producing an estimated 1.2 million letters of credit worth $750 billion last year.

Thus at first glance, it seems rather believable that HSBC was indeed forced in its dealing with the US Department of Justice and was not guilty in trying to undermine China in its 5G endeavours with Huawei, since not only was HSBC being monitored by the DOJ but they had only a great deal to lose and seemingly nothing to gain.

This is where knowing the history of the Hong Kong Shanghai Banking Corporation is absolutely vital.

Where HSBC’s true allegiance lies

For the sake of brevity the story starts with the First Opium War (1839-42). In short, the British Empire had made a move towards a free trade system in the 1840s, modelled off of Adam Smith’s ‘A Wealth of Nations’. In this new system of trade it was believed that if there is a demand for a product, a country has no right to intervene in its transaction. Protectionism, which had been practiced by Britain up until that point, had now been deemed unfit by…Britain, and all other countries were naturally to follow along according to the “new rules” chosen for them.

In the case of China, the trade of opium was ultimately banned by the Chinese, and severe punishments were to be delivered to those involved in smuggling the product into the country, which included British merchants. The British Empire considered this a direct threat to its ‘security’ and its new enforcement of free trade, thus when China did not back down, the First Opium war was waged. The result was the forced signing of the Nanking Treaty in 1842. This treaty, known as the first of the unequal treatises, ceded the territory of Hong Kong to Britain and allowed British merchants to not only trade at Guangzhou but were now also permitted to trade with five additional “treaty ports” and with whomever they pleased.

Created in 1600 with a Royal Charter from Queen Elizabeth I, the East India Company was from its inception indistinguishable from the British Empire itself, rising to account for half of the world’s trade. As is aptly said by Lord Macaulay in his speech to the House of Commons in July 1833, since the beginning, the East India Company had always been involved in both trade and politics, just as its French and Dutch counterparts had been. In other words, the East India Company was to facilitate the geopolitical chess game that the British Empire wished to see played out. Not only the trade contracts it received but whole colonised territories won by the British Empire were handed over to this company to manage, along with a large sized private military, all under the decree of the Crown. This would be most evidently seen in the freedom it was given to control opium production in British India and to then facilitate its trade within Hong Kong and other colonised parts of Southeast Asia.

China was deemed uncooperative to the conditions signed under the Nanking Treaty and a Second Opium war was declared on them by the British Empire, lasting from 1856-60.

HSBC was founded in 1865. A British-friendly bank needed to be created to facilitate trade in the region, connecting the Empire’s newly acquired treasures Shanghai and Hong Kong with its British India (the major world producer of opium) along with the rest of the British Empire and Europe. This bank was not only meant to facilitate foreign trade within China in however it deemed fit, but in addition was created namely to trade in the product of opium. It is important to note that although the founder of HSBC is credited as Thomas Sutherland of the Peninsular and Oriental Steam Navigation Company, a Scottish merchant who wanted the bank to operate under “sound Scottish banking principles”, the bank had been created from the start to facilitate trade on behalf of the British Empire.

Hong Kong was only returned back to China in 1997, and HSBC up until that point had always been run under British economic policy. This is not to be brushed over! Though HSBC claims to have its base in Hong Kong and Shanghai, it always has up until this date had its headquarters in London, England as a banking institution. Not only this, but despite their attempts to claim that their banking practices have long since moved away from opium trade to healthier prospects, as earlier listed in this paper, HSBC clearly deals presently with not only drug money laundering but is also tied to money laundering for the use of terrorist activity.

So what are we to make of this mess?

Well the question needed to be asked is, “Is this all simply about profit?” And if the answer is clearly no, then what is it about? After all, isn’t it true that the British Empire no longer exists?

So what is the real nature of the game?

If it is not just about profit, why were two opium wars ultimately waged against China?

Well, simply put, China was considered a threat by the very autonomy of its existence. For all the effort made to convolute the obvious, it was never just about money at the end of the day but rather geopolitical control. And China has, up until very recently, been maintained in a position of subservient head bowing, even being put in the humiliating position of having to answer to and convince Britain that their handling of Hong Kong since its return to China is satisfactorily democratic. It is thought by the ridiculous, that China somehow needs to answer to Britain as the overseer of what is democratic and civil, when Britain had violently taken the region while waging war to push opium on its people. But the problem actually runs much deeper.

HSBC can be regarded for all intents and purposes as a British entity operating for British interests under the guise of a Chinese bank. However, anyone who has a little sense can see that HSBC could never be considered a Chinese bank with its history and its headquarters in London. But even if this may be already recognised by the Chinese, HSBC is very much embedded in the economic structure of Hong Kong, and it cannot simply be removed being one of the largest derivatives-holding banks in the world, with obvious dire consequences to the world economy if it should crash. In addition, HSBC is operating as one of only three banks that are allowed to print Hong Kong banknotes. By just this alone, Hong Kong’s economy is tied into the world drug trade. Something I am sure its foreign controllers do not want to lose.

Then there is the whole affair with the Hong Kong protests occurring, suspiciously close to the 70^th anniversary of the People’s Republic of China on October 1^st and very clearly pushing for a Tiananmen Square-like debacle. This has not only been tied to American Intelligence but also British Intelligence, with the latter actually being the one in the driver’s seat.

In response to the British Foreign Office threatening ‘severe consequences if a fully independent investigation’ into the so-called police brutality in Hong Kong does not occur, the Chinese Foreign Ministry responded saying “the UK has no sovereign jurisdiction or right of supervision over Hong Kong…it is simply wrong for the British Government to exert pressure. The Chinese side seriously urges the UK to stop its interference in China’s internal affairs and stop making random and inflammatory accusations on Hong Kong.”

It is of great interest to anyone who is paying attention that Britain has been showing its hand in broad daylight lately, which can only mean that the walls must really be closing in. The so-called “second player” to the US has actually been implicated in some rather large-scale meddling on the world stage that would indicate that Britain does not perceive itself as second player to anyone. This has been namely the exposure of GCHQ in orchestrating Russia Gate in an ongoing attempt to destabilise the US from within and its very direct role in the still bizarre-as-ever Skripal case as the pretext to start WWIII with Russia.

It is no surprise to anyone that the 5G network controlled by Huawei poses a great threat to western hegemony over intelligence gathering, and it is no mystery why British Intelligence is very much concerned over its bleak future. The Five Eyes are clearly under British control with four of the five members acting directly under the British Crown. While US Intelligence may once have been American, the British coup which destroyed the OSS soon after FDR’s untimely death put an end to that. British Intelligence and the CIA alike answer to the Crown.

Conditions for the racket

Some experts believe that the enormous fines some non-US (primarily European) banks are being forced to pay in penalties today is part of America’s financial restructuring campaign announced by the US President. Others believe that the fines are a new competitive weapon being used by American banks against European ones. Still others believe that the new mechanism of levying fines is the new global initiative of America’s ruling elite to strengthen the country’s geopolitical superiority over the Old World and the world as a whole. There are also other theories behind what today is becoming known as the dollar «racket»… 

On the one hand, after the events of 11 September 2001, the US began vigorously adopting legislation that dealt with money laundering, corruption, financial terrorism, tax evasion, organised crime, drug trafficking, cybercrime and other security threats. It is interesting that the new generation of laws adopted in America are of an extraterritorial nature. This means that if a threat to America’s security is created by the actions (financial operations) of foreign banks, companies and individuals outside of America itself, legal liability may still be applicable to these entities. American courts could then impose a penalty or other form of punishment on these foreign banks, companies and individuals. Given that common law prevails in America, US court decisions on the penalising of non-resident entities are currently rubber-stamped almost automatically. Furthermore, the US is initiating the development and ratification of a variety of international conventions on combating the threats listed above with other countries. Conventions like these are becoming additional grounds for penalising non-US perpetrators in America. 

On the other hand, in order to monitor all of the violations being committed by foreign banks, companies and individuals outside of America, Washington has spent decades creating a global financial-information system. This system, which I described in my article «The world under the eagle eye of the US government and banks», allows all the actions of non-resident entities in the world to be monitored and all violations of America’s rules of the game outside of the US to be recorded. 

The history of Standard Chartered

Standard Chartered was, until last year, one of the most secret banks. It was established in Great Britain as far back as the middle of the 19th century and is thought to be part of the Rothschild empire. Like the Rothschilds themselves, Standard Chartered preferred to remain in the shadows after the Second World War, but in terms of the scale of its operations, it became one of Europe’s largest banks. In recent years, 90-95 percent of this bank’s pre-tax profit has been obtained from operations outside of the US, Great Britain and Continental Europe. In August 2012, the bank was forced to blow its cover owing to a scandal initiated by the US Department of Financial Services (DFS). It brought charges against Standard Chartered alleging that the bank had carried out illegal transactions aimed at supporting the Islamic Republic of Iran. According to the DFS, these transactions amounted to a quarter of a trillion dollars, and the New York branch was helping to shift the money between British and Middle Eastern banks to the benefit of Iranian citizens. According to American authorities, in fact, Standard Chartered could be linked to terrorist and extremist organisation in Libya, Sudan and Myanmar, which are also areas covered by US sanctions. The New York Department of Financial Services (a subdivision of the DFS) declared: «For almost 10 years, the bank schemed with the government of Iran and hid from regulators roughly 60,000 secret transactions, involving at least $250bn». As noted above, Standard Chartered passed money through its New York branch on behalf of Iranian financial clients, including the Central Bank of Iran and state-owned Bank Saderat and Bank Melli, which were subject to US sanctions. At the centre of the scandal were so-called «U-Turn transactions», which meant that the money was not issued from Iran and did not end up in that country, but was moved on behalf of Iranians between British and Middle Eastern banks with the help of the New York branch of Standard Chartered. The US Ministry of Finance had banned such operations in November 2008 because of the fear that they were being used to bypass sanctions. According to the regulator, actions like these were damaging America’s entire financial system, making it vulnerable to weapons and drug trafficking and terrorists. Ultimately, the American authorities demanded that the bank pay a fine of $667m. As reported by the media, the fine has already been paid. 

The «cropping» of other foreign banks

The system of monitoring bank transactions is an important factor in the competitive struggle between US and Western European banks. America is especially worried about banks in London, which is why they find themselves in the crosshairs of the American intelligence agencies. Every entity that has been accused of collaborating with Iran over the past year has been of British or Dutch descent. In June 2012, the Dutch bank ING admitted breaching the sanctions imposed on Iran and agreed to pay US authorities the enormous fine of $600m (and according to some reports, this was also for breaching sanctions imposed on Cuba). At the time, this was the biggest fine ever imposed in the entire history of sanction breaches.

The British bank Barclays PLC also agreed to pay $453m after an investigation by American and British authorities showed that the Bank had allowed serious violations when making decisions on lending and deposit operations, virtually participating in money laundering. 

In the summer of 2012, the US Senate tackled the British bank HSBC Holding which, according to American intelligence agencies, had been handling operations for the practically US-controlled Mexico, providing services to Mexican drug dealers. The bank was also accused of breaching sanctions imposed on Iran. Only in December 2012 did HSBC declare it was ready to pay US authorities a fine totalling $1.92bn. 

In 2012, the scandal regarding the manipulation of the Libor interbank lending rate reached its peak. Major European (primarily British) and American banks had been manipulating the rate for a number of years, allowing them to get rich illegally. An investigation into the Libor manipulations was started in 2008 and involved other major banks as well as Barclays such as the Royal Bank of Scotland, Lloyds Banking Group, Citigroup, HSBC, UBS and Deutsche bank, with Barclays being the first bank to admit responsibility. Over the last year, there have been a number of subsequent investigations by the financial supervisory authorities of America, Great Britain, Switzerland and a few other European countries regarding these manipulations. The banks were charged with heavy fines. It should be said that the fines for these manipulations were considerably more substantial than in Europe. Thus in December last year, the Swiss bank UBS declared that for manipulating the Libor rate, it would be paying a fine of nearly 1.4bn Swiss francs ($1.5bn). 

The US FATCA law and foreign banks

Serious problems may arise for foreign banks with regard to the fact that the US FATCA (Foreign Account Tax and Compliance Act) law on the taxation of foreign accounts came into full operation this year. According to this law, foreign banks will be obliged to report all clients which may have something to do with the US (citizenship or residence visa) to the American Internal Revenue Service, as well as disclose information about their operations and account balances. If the government or bank refuses to comply with the requirements of FATCA, then the US will withhold a 30 percent tax on all the income of these banks from sources within the US. In this way, the US tax authorities can take control of the global financial system. Even if an American (a citizen or resident, including the owner of a «green card») did not provide information on their foreign accounts or companies, this is now dealt with by the foreign bank. It is not impossible that some small financial organisations outside of the US are completely refusing to provide services to American clients, to avoid getting tied up in the rather burdensome accounting procedures of the US Internal Revenue Service regarding their accounts. They still have to enter into an agreement with the US Internal Revenue Service, however, otherwise they will find themselves being subjected to the penalty tax even if they do not have any clients from America. Consequently, the information on American taxpayers that the Internal Revenue Service of the United States had previously had to obtain with a fight (remember at the very least the story involving the Swiss bank UBS) is now going to be offered by foreign banks both regularly and voluntarily.

In March 2013, the US Internal Revenue Service announced that it was planning to search for its debtors around the world and was expecting to receive $5m in fines from the foreign banks concealing them. First on the list were banks in India, Israel, Hong Kong and Singapore. Sanctions against the Swiss bank Wegelin, which did not have any business operations in America, became the precedent. Lawyers say it has placed the continued existence of banking secrecy in doubt and has prepared the financial sector for the rules of FATCA.

«The government has no intention of letting up in its relentless pursuit of wealthy Americans with secret accounts offshore, and soon it will have even more tools to work with», says Mark Matthews, a former chief of the Internal Revenue Service’s criminal-investigations division who is now a lawyer at Caplin & Drysdale. Over the past four years, the US government has already managed to obtain $5.5bn in unpaid taxes and penalties. 

A decision on the possibility of imposing sanctions against a foreign bank not operating on US soil was passed on 4 March 2013. The oldest private bank in Switzerland, Wegelin, was fined $74m by the American authorities for tax law violations. Wegelin was established in 1741 and was considered one of the country’s most prestigious banks. The bank did not have any offices or departments on US soil, therefore it was certain it did not face any penalties as a result of the facts of the case. In January 2013, the bank admitted that it had closed its eyes to the activities of its American clients who had been avoiding paying taxes. It is more than likely that Wegelin will close soon after it pays the fine. As a result of the trial, the bank virtually ceased its business operations and its clients began withdrawing their money. Wegelin was the main bank Americans used to avoid paying taxes after the Swiss bank UBS entered into an agreement with the authorities in 2009. UBS agreed to breach its banking secrecy law and gave the US authorities the names of 4500 of its clients (the US had insisted on information about 52,000 non-resident accounts). Nevertheless, the bank still had to pay a $780m fine. The bank lost a further $20m owing to the mass exodus of clients frightened by the bank’s willingness to relax the banking secrecy law. 

New York as the centre of the dollar racket

It is not just banks that are getting caught in the US authorities’ field of vision, but also companies in the non-financial sector of the economy. With this, it may not just be a case of breaching American sanctions against one country or another, but also corruption violations and offences in other countries. For example, in 2010 the US Justice Department accused the German group Daimler, which owns Mercedes-Benz, of bribing officials in 22 countries, including Russia. Daimler pleaded guilty and preferred to pay its way out of trouble. The Germans paid the US government a fine of $185m. Furthermore, the affair had absolutely nothing to do with the US: the company did not bribe American officials and no American laws were violated. 

New York, where the majority of US banks in which foreign banks open up their own correspondent accounts are situated, is playing its own special role in the dollar racket. While in turn, New York banks have their accounts in the Federal Reserve Bank in New York. No matter what anybody says, New York is still the global financial centre with which neither London, Tokyo, Frankfurt or Hong Kong can compare. After all, the lion’s share of all global dollar-denominated transactions passes through New York. This includes those that have absolutely nothing to do with the US. Consequently, the New York State Department of Financial Services, which was created in 2011, also has its special role to play in the exposure of bank and company wrongdoers. Around 4,500 organisations, with assets of $6.2 trillion, are under the direct control of this agency.

Lawyer David Pitofsky, from the law firm Goodwin Procter, observes: «Even if a transaction is done, say, in Japanese yen, if a blip in the system turns these into dollars, that in theory could mean it falls under US law» (http://www.bbc.co.uk/news/19172065). This circumstance is a powerful incentive for non-US banks and companies to replace the US dollar with the currencies of other countries when making international payments, while at the same time creating their own regional systems of international payments. There is no doubt, for example, that there is a need for the immediate creation of an integrated group of Euro-Asian countries involving Russia, Belarus, Kazakhstan and other post-Soviet countries. International payments within this group could then be made in roubles, and Moscow would be able to lay claim to the status of regional financial centre as an alternative to New York.