Lessons from an Iranian gazelle3 min read . Updated: 10 Sep 2012, 10:14 PM IST
Lessons from an Iranian gazelle
Lessons from an Iranian gazelle
How Standard Chartered’s Iranian gazelle was snared by Lawsky.
So ran a headline that I saw recently, pointing to a widely disseminated Reuters report. It was the word “gazelle" that caught my attention. The gazelle is a graceful, swift antelope, celebrated for its soft lustrous eyes. It is capable of running at high speeds for long periods.
But how did an animal’s name get into a financial report?
My business dictionary has an entry for gazelle: it stands for a newly started company making quick progress. The generally accepted definition prescribes a growth rate of 20% in the first four years, starting from a base of $1 million. Gazelles form a small segment of all business; but they are responsible for a major share of job creation.
America has imposed a raft of sanctions against Iran over its nuclear programme. SCB found business with Iran attractive and devised ways of bypassing the sanctions and establishing business with Iran. The regulatory body in New York warned the bank about its violation of the sanctions and asked it to explain. The bank was named as a “rogue institution" helping to provide “terrorists, weapons dealers, drug kingpins and corrupt regimes" access to the US financial system.
The regulator issued an order detailing the role the bank was playing in laundering money for Iran. The name given to this mode of transferring money was “U-turn". This was legal until 2008, on condition that the transaction did not originate or culminate in Iran. The ploy adopted by the bank was to get the money transferred from Iran to some non-Iranian bank, in Britain or in the Middle East. SCB then took over and passed the money through the American financial system into another non-Iranian bank. When it was found that the U-turn was being abused, America banned such transactions. SCB was found guilty of hiding 60,000 transactions of a value of $250 billion.
The bank’s transactions with Iran money were well planned. Its game plan was contained in a memo titled “Project Gazelle: Report on Iranian Business." There was also an instruction manual for Iran. The mention of gazelle in the Reuters headline is drawn from the title of this memo.
The language of finance can be opaque sometimes and the terminology can be difficult to grasp. On the one side, there are simple metaphors like hair cut and dog food (testing a product before putting it on the market). On the other, there is formal terminology like “restructured loan" and “securitized asset". Terms that sound positive and friendly may actually be negative and misleading.
If U-turn suggests a metaphor from road traffic, “wire stripping" refers to an electrician’s job of removing insulation from wires. In money laundering, wire stripping means the removal of crucial information from wire transfer messages in order to hide the identity of the parties engaged in the transaction, especially removal of references to Iran.
“Structuring" seems to suggest that something positive is being done to increase efficiency, but it is really a widely practised ploy in money laundering. The amount involved in the transaction is deliberately kept below the obligatory reporting threshold by dividing the transaction into a number of small transfers. This stratagem is also known as “smurfing".
“Round tripping" is a strategy by which a company sells assets or securities to another company, while agreeing to buy it back at the same price later on. This is a kind of market manipulation that helps to route black money.
In the event SCB entered into a settlement with the regulator and agreed to pay a penalty of $340 million, admitting that the transactions involved ran up to a total of at least $250 billion.
V.R. Narayanaswami is a former professor of English, and has written several books and articles on the usage of the language. He looks at the peculiarities of business and popular English usage in his fortnightly column.
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