Principles of Treasury’s (reserve currency) War used by private plaintiffs – U.S. law determines who non-U.S. banks can do business with

Prologue a comnment to a blog post from 2014 …

Mr Jatras:

Thanks for a great article. You have used FATCA as a particularly egregious example of the propensity of the President to either ignore law or make law himself. The Obama presidency is one characterized by a rogue President who does what he wants, when he wants and to whom he wants.

One interesting example is the recent 10 billion dollar fine which he personally levied against the French Bank BNP. This is described in “The Economist” as follows:

“WHAT is the appropriate penalty for a firm that abets genocide? Roughly a year’s profit and the sacking of a dozen employees, the American authorities concluded this week. At any rate, that is the punishment meted out to BNP Paribas, a French bank that pleaded guilty to helping the Sudanese government sell oil, clearing proceeds through New York in violation of American sanctions. At the time government-backed militias in the region of Darfur were massacring civilians by the tens of thousands.”

What’s interesting that the bank was fined NOT as a result of a direct act of Congress, but as a fine levied as Executive Order 13622, by President Obama himself, found here:

Interestingly, the U.S. is claiming jurisdiction over the French Bank on the basis that the bank was using U.S. dollars.

To put it simply we have a situation where:

1. President Obama decides to impose a 10 billion fine on a French Bank; and

2. He claims jurisdiction over the bank on the basis that the bank was using U.S. dollars.

Leaving aside the troubling issue of Obama acting as though he is a “law unto himself”, it is obvious that the U.S. can no longer be trusted enough for the USD to be the main reserve currency. The erosion of the status of the USD is well under way.

The threat of FATCA sanctions levied at non-U.S. banks will exacerbate that trend.

Thanks again for a great article!

How the U.S. uses the dollar as to regulate foreign banks by “its very nature benefit U.S. citizens

The above tweet references an article that is of interest because it demonstrates the extension of Treasury’s War to a private plaintiff. It demonstrates how (as per Cook v. Tait) the U.S. government “by its very nature benefits its citizens“.

In other words if:

1. U.S. law prohibits a non-U.S. bank from performing certain acts or dealing with certain people.

2. That bank performs an act that U.S. law prohibits

Then,

That bank is liable to a private “U.S. citizen” plaintiff for damages.

The article includes the following:

In a unanimous verdict late Monday, a federal jury agreed that Jordan-based Arab Bank violated U.S. anti-terrorism laws in conducting business with Hamas-linked “charities.”

Some Israelis refer to Arab Bank as the “Grand Central Station of terrorist financing.”

It is the first case that successfully employed the strategy of going after terrorists by suing a major bank that allegedly did business with them. More than 300 U.S. nationals were part of the landmark terrorism trial that began last month in New York.

Some Israelis refer to Arab Bank as the “Grand Central Station of terrorist financing.” The plaintiffs or their family members were injured or killed in terrorist attacks while visiting Israel between 2000 and 2005 during the second intifada or Palestinian uprising.

>>> Arab Bank Accused of Helping Reward Hamas Suicide Bombers in Terrorism Case

In finding the bank guilty of violating anti-terrorism laws by providing material support to Hamas, jurors rejected Arab Bank’s key defense that it had no way to know some of its clients were using its accounts to provide payoffs for terrorist acts.

Nobody likes violence, but …

I suggest that there is a broader principle at play here. Can the U.S. government be permitted to regulate the conduct of foreign banks? In his book, “Treasury’s War“, Juan Zarate details how the U.S. government, rather than going after the “bad guys”, goes after those who do business with the “bad guys”.

The jurisdictional basis for the U.S. Government asserting jurisdiction over non-U.S. banks

Now, any “right thinking” person would wonder:

How can the U.S. government regulate foreign banks?

How can the U.S. government imagine that it can impose FATCA on the world and use FATCA Sanctions as an instrument of foreign policy?

The answer is … It’s about the “reserve currency stupid!”

Once upon a time, Circa 1944, when the U.S. government had a reasonable “moral status, before law had become a substitute for morality, the Bretton Woods Conference made the U.S. dollar the world’s primary reserve currency.

A bit of history – once upon a time in “reserve currency land …

On of the 70th anniversary of the July 1, 1944 Bretton Woods conference – the landmark gathering that created the International Monetary Fund (IMF), the World Bank and later the World Trade Organization (WTO) – it’s hard to know whether it’s the best or worst of times for multilateralism.

Bottom line – On July 1, 1944 the U.S. dollar became the world’s primary reserve currency. Until it is replaced (which is coming) the U.S. dollar is and will be the oxygen of the financial system.

Countries need access to the U.S. dollar which allows the U.S. government to abuse that need. If you want to use our dollar, then you must do what we want! If you use our dollar and violate our laws, we will punish you.

One of the most egregious examples of the U.S. abusing the status of the dollar as the primary reserve currency is the case of the French Bank PNB Paribas. This bank was subjected to a 9.9 billion dollar fine, by a U.S. law that allowed President Obama to be a “law unto himself”. In others words, the fine was effectively levied by Obama.

If you have this far in the post, you really need to read the “Economist article” which is referenced in the above tweet.

Of note is the following comment to the article:

America is playing a very dangerous game indeed.It currently has the “exorbitant privilege” of having the worlds reserve currency. The economic dominance that made this so is already declining. By running this sort of extortion racket it is making is more and more likely that the world will move to a different reserve currency – very likely an internationally agreed artificial currency. Then the USA will find that international trading carefully avoids any contamination with the USA. New big international banks will rise which deliberately decide not to have a US banking license.

America will rue the way it threw away its advantage.

 
A law made by Congress is bad enough, but an order made by President is unjustifiable. It’s not about the law, it’s about Executive Order 13622

On July 31, 2012, President Obama issued Executive Order (E.O.) 13622, “Authorizing Additional Sanctions with Respect to Iran.” The E.O. authorizes Treasury to impose new financial sanctions on foreign financial institutions found to have knowingly conducted or facilitated certain significant financial transactions with the National Iranian Oil Company (NIOC) or Naftiran Intertrade Company (NICO), or any entities owned, controlled by, or acting on behalf of NIOC or NICO, for the purchase or acquisition of petroleum, petroleum products, or petrochemical products from Iran. These entities would be prohibited from opening or maintaining correspondent or payable-through accounts in the U.S. In addition, the E.O. authorizes Treasury to block the property and interests in property of any person determined to have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of, NIOC, NICO, or the Central Bank of Iran, or the purchase or acquisition of U.S. bank notes or precious metals by the Government of Iran.

Because OFAC has not issued corresponding regulations including general licenses, a number of typically generally licensed activities if conducted with NIOC, NICO and the Central Bank of Iran can now result in sanctionable activity. For example, specific authorization is now needed from OFAC before any person provides mail or telecommunications services to NIOC, NICO, or the Central Bank of Iran. Additionally, any intellectual property claims involving these entities also must be specifically licensed by OFAC – as must the provision of legal services. While these changes again reshape the sanctions landscape with respect to Iran, companies cannot expect a lengthy compliance grace period. Companies must therefore act quickly to assess their current operations, including those of their foreign subsidiaries and affiliates, and develop immediate plans to bring themselves into compliance. Given the lack of corresponding regulations, when in doubt, it may be appropriate to file requests for guidance and specific authorizations.

http://www.crowell.com/NewsEvents/AlertsNewsletters/all/Are-You-At-Risk-Under-Dramatic-Expansion-of-US-Sanctions-Against-Iran-and-Syria

For the complete text of Executive Order 13622:

http://www.gpo.gov/fdsys/pkg/DCPD-201200607/pdf/DCPD-201200607.pdf

And finally …

We now have proof that the “U.S. government by its very nature benefits its citizens.

Why?

Because if a foreign bank, does something the U.S. government doesn’t like, and a U.S. citizen believes he has been damaged by that act:

The U.S. citizen can sue the foreign bank!

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