Children from one of the communities in Ocean Division, southern Cameroon, who lost much of their forestland after the government leased it to a logging company. Credit: Monde Kingsley Nfor/IPS

By Carey L. Biron
WASHINGTON, Dec 9 2014 (IPS)

Just half of major global banks have in place a public policy to respect human rights, according to new research, despite this being a foundational mandate of an international convention on multinational business practice.

Further, of the 32 global banks examined, researchers found that none has publicly put in place a process to deal with human rights abuses, if identified. None has even created grievance mechanisms by which those impacted by potential abuses can complain to the banks.“The findings of this report are quite sobering about what can be expected from self-regulatory principles.” -- Aldo Caliari

The findings, published by BankTrack, an international network of watchdog groups, come three and a half years after the adoption of the United Nations Guiding Principles on Business and Human Rights. These principles, unanimously endorsed by the U.N. Human Rights Council in 2011, specify a range of actions and obligations for all businesses, including the financial sector.

Yet banks have a unique role in underwriting nearly all of the business activity around the globe, even as they are typically shielded from the impacts of those investments.

“Banks covered in this report have been found to finance companies and projects involving forced removals of communities, child labour, military backed land grabs, and abuses of indigenous peoples’ right to self-determination,” the report, released last week, states.

“Policies and processes, open to public scrutiny and backed by adequate reporting, are important tools for banks to ensure that these kinds of abuses do not happen, and that where they do, those whose rights have been impacted have the right to effective remedy … If these policies and procedures are to be meaningful, the finance for such ‘dodgy deals’ must eventually dry up.”

One of the banks studied in the new report, JPMorgan Chase, is one of the leading U.S. financiers of palm oil, through loans and equity investments. While the bank does have a human rights policy, BankTrack’s researchers find this policy applies only to loans, not investments.

“When it comes to reporting on implementation, the bank falls flat, making the policy little more than window-dressing,” Jeff Conant, an international forests campaigner with Friends of the Earth U.S., a watchdog group that is working on palm-oil financing, told IPS.

“We’ve spoken with JPMorgan Chase about the need to give impacted people an opportunity to file complaints about the human rights impacts of its financing, with the belief that this is a first step towards accountability. Frankly, from the bank’s response, I don’t see them stepping up anytime soon.”

While private finance today facilitates almost the full range of corporate activity, Conant notes, “the finance institutions themselves are wholly unaccountable.”

Sobering results

According to the new study, a few banks appear to be well on their way to conformity with the Guiding Principles. The top-ranked institution, the Dutch Rabobank, received a score of eight out of 12, with Credit Suisse and UBS close behind.

These are the exceptions, however. Against a set of 12 criteria, the average score was only a three.

Many scored at or near zero. While those ranked at the very bottom include several Chinese institutions, they also include banks in the European Union and the United States.

Indeed, Bank of America, one of the largest financial institutions in the world, scored just 0.5 out of 12, receiving a minor bump for having expressed some commitment to carrying out human rights-related due diligence. (The bank failed to respond to request for comment for this story by deadline.)

“The findings of this report are quite sobering about what can be expected from self-regulatory principles,” Aldo Caliari, the director of the Rethinking Bretton Woods Project at the Center of Concern, a Washington think tank, told IPS.

“The Guiding Principles are the bare minimum of any human rights framework in the corporate sector, a framework that has the companies’ consent. So the fact that there is so little [adherence to] such a relatively weak tool, where every effort to court corporations’ support has been made, is, indeed, very telling.”

Despite the spectrum of findings on implementation, the financial services industry as a whole has taken note of the Guiding Principles.

In 2011, four European banks met to discuss the principles’ potential implications for the sector. Three more banks eventually joined what is now called the Thun Group, and in October 2013 the grouping released an initial paper on the results of these discussions, including recommendations for compliance.

A previously existing set of voluntary guidelines for the banking sector, known as the Equator Principles, were also updated in 2013 to reflect the new existence of the Guiding Principles. So far, the Equator Principles have been signed by 80 financial institutions in 34 countries.

“To date, banks’ efforts to implement the UN Guiding Principles have mainly revolved around producing discussion papers on the best way forward,” Ryan Brightwell, the new report’s author, said in a statement.

“BankTrack has welcomed these discussions, but some three and a half years on from the launch of these Principles, it is time to move onto implementation.”

Strengthening accountability

The new findings on lagging implementation will strengthen arguments from those who want to tweak or supplant the Guiding Principles. Some suggest, for instance, that the framework be changed to treat financial institutions differently from other sectors.

“[T]he financial sector requires an exceptional treatment when it comes to the application of the Guiding Principles,” the Center of Concern’s Caliari wrote last year in comments for the Working Group on Business and Human Rights.

“Financial companies, more than other companies, have the potential, with their change of behaviour, to influence the behaviour of other actors. That means they also should be upheld to a greater level of responsibility when they fail to do so.”

Caliari and others are also part of a movement to move beyond voluntary frameworks such as the Guiding Principles (at least in their current form), and instead to see through the creation of a binding mechanism.

This decades-long effort received a significant boost in June, when the U.N. Human Rights Council voted to allow negotiations to begin toward a binding treaty around transnational companies and their human rights obligations. (This same session also approved a popular second resolution, aimed instead at strengthening implementation of the Guiding Principles process.)

The new data on banks’ relative lack of compliance with the Guiding Principles, Caliari says, is one of the reasons the call for a legally binding treaty “has been gaining ground.”

He continues: “It is increasingly clear that mechanisms that rely on the consent of the companies cannot be the total of available accountability mechanisms. More is needed.”

Edited by Kitty Stapp

The writer can be reached at cbiron@ips.org

Credit: Insider Monkey www.insidermonkey.com/ CC by 2.0

By Thalif Deen
UNITED NATIONS, Sep 8 2014 (IPS)

The Group of 77, the largest single coalition of developing countries, is hitting back at New York City banks that arbitrarily cancelled the accounts of more than 70 overseas diplomatic missions, leaving ambassadors, senior and junior diplomats and non-diplomatic staff without banking facilities.

The 193-member General Assembly is expected to adopt a resolution, a copy of which was obtained by IPS, which requests Secretary- General Ban Ki-moon to review and report back – within 150 days – “any impediments or obstacles with respect to the accounts opened by the Permanent Missions of Member and Observer States or their staff in the City of New York.”"If it is true that JP Morgan Chase is closing those accounts...I believe the United Nations should refrain from having any business with that bank and the host country should join the discriminated member states in protesting this action." -- Barbara Tavora-Jainchill

The largest number of diplomatic accounts was in one of the biggest banks in the U.S. – J.P. Morgan Chase – which was once housed in the U.N. secretariat as Chemical Bank and considered part of the extended U.N. family.

Relenting to pressure from the United States, the resolution does not single out Chase by name – although it did so in the original draft which was revised after several rounds of closed-door negotiations since last May.

The resolution has been sponsored by the Group of 77 (G-77) comprising 132 developing nations, plus China.

Virtually all of the cancellations were accounts with developing country U.N. missions.

Responding to demands by several countries urging the United Nations to withdraw all its funds from unfriendly banks as a retaliatory measure, the resolution requests the secretary-general to report to the General Assembly “on the financial relations of the United Nations Secretariat with the banking institutions in the City of New York.”

The report is expected to name names and identify the banks responsible for mass cancellations of accounts.

JP Morgan Chase handles billions of dollars in the accounts maintained by the United Nations and its agencies in New York City.

Dr. Palitha Kohona, Sri Lanka’s permanent representative to the United Nations, told IPS his country was one of the victims of the banks’ actions

“The resolution being proposed by the G-77 and China is a reaction to the highly arbitrary manner in which the Chase Bank closed the accounts of certain missions and their staff members,” he said.

Some accounts had been maintained at this bank for many years, he added.

“We responded to a range of concerns, especially of G77 and China, when drafting this resolution,” said Kohona.

If Chase was forced to comply with some local regulations, was this measure applied selectively or to all missions that maintained accounts with it? he asked.

“Was the host country in compliance with its international legal obligations vis-a-vis the U.N. Member States, if it had actually enforced regulatory requirements on the banks that made the conduct of normal diplomatic business difficult?” said Kohona, a former chief of the U.N. Treaty Section.

The resolution cites the 1947 U.S.- U.N. headquarters agreement that guarantees the rights, obligations and the fulfillment of responsibilities by member states towards the United Nations, under the U.N. and under international law.

Additionally, it cites the 1961 Vienna Convention on Diplomatic Relations as a regulatory framework for states and international organisations, in particular the working relationship between the United Nations and the City of New York.

Kohona asked, “Should the U.N. continue to have relations worth billions of dollars per annum with Chase, if that bank refuses to have relations with U.N. member states. Why should the bank benefit from the U.N. in these circumstances?”

He said some countries are reduced to bringing over even the salaries of their staff through the diplomatic bag.

The action of Chase caused great inconvenience and added to the costs of many delegations, he added.

A Latin American diplomat told a meeting of the G-77 last April that diplomats may be forced to stash their money under mattresses in the absence of banking facilities.

Meanwhile, there have been reports that bank cancellations have gone beyond diplomatic missions and even selectively affected U.N. staffers, including a high-ranking U.N. staffer from a South Asian country, whose account was cancelled.

Barbara Tavora-Jainchill, president of the U.N. Staff Union, told IPS, “If it is true that JP Morgan Chase is closing those accounts, which in my view goes against all principles of the United Nations in terms of equality of nations, I believe the United Nations should refrain from having any business with that bank and the host country should join the discriminated member states in protesting this action.”

The resolution also requests the secretary-general – within the next 120 days – to provide member and observer states with information on alternative options regarding banking services in the City of New York so as to enable them and their permanent missions to adequately manage and maintain their accounts, assessed budgetary contributions, voluntary contributions, transfers and other financial responsibilities directly related to their membership in the United Nations.

The General Assembly will also request the host country, the United States, “to take, as soon as possible, additional measures to assist the Permanent Missions accredited to the United Nations and their staff to obtain appropriate banking services.”

A G-77 delegate told IPS a U.N. official has assured that Chase will not be provider of banking services to United Nations after its current contract expires.

Bidders of the new contract did not include Chase, which was disqualified for “technical reasons”, he added. But he did not specify what the technical reasons were.

Under U.S. pressure, the G-77 watered down the tone of resolution from the original draft.

The revised resolution says that member states should have appropriate banking services instead of being “guaranteed” banking services.

The United States said it could not “guarantee” anything but agreed to take additional measures to assist Permanent Missions and their staff in obtaining banking services.

The closure of accounts was triggered by a request from the U.S. treasury, which wanted all banks to meticulously report every single transaction of over 70 blacklisted U.N. diplomatic missions, and individual diplomats perhaps as part of a monitoring system to prevent money laundering and terrorism financing.

But the banks have said such an elaborate exercise is administratively expensive and cumbersome.

And as a convenient alternative, they closed down all accounts, shutting off banks from the diplomatic community in New York.

Edited by Kitty Stapp

The writer can be contacted at thalifdeen@aol.com

The 132-member Group of 77, the largest single coalition of developing nations, has urged Secretary-General Ban Ki-moon to provide, “as soon as possible…alternative options for banking services” in New York City following the mass cancellation of bank accounts of U.N. missions and foreign diplomats.

The draft resolution, a copy of which was obtained by IPS, is an “agreed text” which has the blessings of all 132 countries, plus China.

Responding to a demand by member states for reciprocal retaliation, the G77 requests the secretary-general to review the “U.N. Secretariat’s financial relations with the JP Morgan Chase Bank and consider alternatives to such financial institutions and to report thereon, along with the information requested.”

Chase bank handles billions of dollars in the accounts maintained by the United Nations and its agencies in New York City. Credit: UN Photo/Milton Grant

Currently, the bank handles billions of dollars in the accounts maintained by the United Nations and its agencies in New York City.

The Group expresses “deep concern” over the decisions made by several banking institutions, including JP Morgan Chase, in closing bank accounts of mostly developing countries, and diplomats accredited to the United Nations and their relatives.

The resolution, which is subject to amendments, cites the 1947 U.S.- U.N. headquarters agreement that “guarantees the rights, obligations and the fulfillment of responsibilities by member states towards the United Nations, under the United Nations Charter and international law.”

Additionally, it cites the 1961 Vienna Convention on Diplomatic Relations as a regulatory framework for states and international organisations, in particular the working relationship between the United Nations and the City of New York.

Citing the two agreements, the G77 is calling for all “necessary measures to ensure permanent missions accredited to the United Nations and their staff are granted equal, fair and non-discriminatory treatment by the banking system.”

Asked for an official response, U.N. Spokesperson Stephane Dujarric told IPS: “We would not comment on a draft resolution.”

At a closed-door meeting of the G77 last month, speaker after speaker lambasted banks in the city for selectively cutting off the banking system from the diplomatic community, describing the action as “outrageous”.

Their anger was directed mostly at JP Morgan Chase (formerly Chemical bank) which was once considered part of the U.N. family – and a preferred bank by most diplomats – and at one time was housed in the secretariat building.

The G77 is expected to hold consultations with member states outside the Group, specifically Western nations, before tabling the resolution with the 193-member General Assembly later this month.

If any proposed amendments are aimed at weakening the resolution, the G77 will go for a vote in the Assembly with its agreed text, a G77 diplomat told IPS Thursday.

But with the Group having more than two-thirds majority in the Assembly, the resolution is expected to be adopted either with or without the support of Western nations.

If adopted by a majority vote, the secretary-general is expected to abide by the resolution and respond to its demands.

The draft resolution also requests the secretary-general to review and report to the General Assembly, within 120 days of its adoption, “of any obstacles or impediments observed in the accounts of permanent missions or their staff at the JP Morgan Chase Bank in the City of New York, and the impact these impediments have on the adequate functioning of their offices.”

And to this end, the G77 invites all members to provide the secretary-general with relevant information that will facilitate the elaboration of such report.

In an appeal to the United States, the G77 has also underscored the importance of the host country taking the necessary measures to ensure that personal data and information of persons affected by the closure of accounts is kept confidential by banking institutions, and requests the secretary-general to work with the host country in that regard and to report to the General Assembly within 90 days.

The closure of accounts was triggered by a request from the U.S. treasury, which wanted all banks to meticulously report every single transaction of some 70 “blacklisted” U.N. diplomatic missions, and individual diplomats – perhaps as part of a monitoring system to prevent money laundering and terrorism financing.

But the banks have said such an elaborate exercise is administratively expensive and cumbersome.

And as a convenient alternative, they have closed down, or are in the process of closing down, all accounts, shutting off banks from the diplomatic community in New York.

Chase handles most of the accounts and money transfers of the United Nations and its agencies, running into billions of dollars. Credit: Jim the Photographer/cc by 2.0

By Thalif Deen
UNITED NATIONS, Mar 25 2014 (IPS)

Addressing a closed-door meeting of the Group of 77 (G77) developing countries last week, a visibly angry Latin American delegate recounted the growing new hostility towards foreign diplomats in New York city.

In some residential buildings, he said, there were covert signs conveying an unfriendly message: “Pets and diplomats not welcome.”

It is bad enough for U.N. diplomats to be lumped together in the company of dogs and cats in the city’s high-rise buildings, he bluntly told delegates, but now “the banking sector is treating us as criminals.”

At a meeting of the 132-member G77, the largest single coalition of developing countries, speaker after speaker lambasted banks in the city for selectively cutting off the banking system from the diplomatic community, describing the action as “outrageous”.

Their anger was directed mostly at JP Morgan Chase (formerly Chemical bank) which was once considered part of the U.N. family – and a preferred bank by most diplomats – and at one time housed in the secretariat building.

Chase also handles most of the accounts and money transfers of the United Nations and its agencies, running into billions of dollars.

The U.S. treasury apparently has informed all banks that every single transaction of some 70 “blacklisted” U.N. diplomatic missions, and even individual diplomats, be meticulously reported back to Washington (perhaps as part of a monitoring system to prevent money laundering and terrorism financing).

The banks have responded that such an elaborate exercise is administratively expensive and cumbersome. So as a convenient alternative, they have closed down, or are in the process of closing down, all accounts, shutting out the diplomatic community in New York.

As one diplomat warned, if this situation continues, “we may have to request cash in diplomatic pouches from our home countries, and bank our money under mattresses.”

There are reports that some diplomatic missions want to pay their annual dues to the United Nations in hard cash, while others, citing “diplomatic reciprocity”, want the Secretariat to retaliate by closing its own accounts with these banks.

Ian Williams, a longstanding U.N. correspondent and senior analyst at Foreign Policy in Focus, wonders why banks should even bother monitoring U.N. missions and diplomats when the U.S National Security Agency (NSA) can perhaps do a better job.

The NSA, which has already been accused of tapping telephones and monitoring the movements of diplomats, could probably provide details of all bank transactions entered electronically, he said, because they are known to have the capacity to do so.

“Unless you can find a bank that uses paper ledgers and an abacus,” Williams told IPS, with tongue firmly entrenched in his cheek.

When the United Nations decided to locate its secretariat in the city of New York, the United States signed a ‘headquarters agreement’ back in 1947 not only ensuring diplomatic immunity to foreign diplomats but also pledging to facilitate the day-to-day activities of member states without any hindrance.

Williams said the United States has never been enthusiastic at accommodating itself to international law, as was proven when the General Assembly temporarily relocated to Geneva because Washington refused a visa for Palestinian leader Yassir Arafat to visit New York in December 1988.

In his address to the General Assembly session in Geneva, perhaps the only one of its kind, Arafat took a swipe at Washington when he prefaced his statement by saying “it never occurred to me that my second meeting with this honourable Assembly, since 1974, would take place in the hospitable city of Geneva”.

The story about the new dispute between the diplomatic community and the banks surfaced in the Inner City Press blog last week.

But IPS ran a detailed story titled Banks Blacklist U.N. Missions back in January 2011, when financial institutions first imposed this rule on some U.N. missions, but not on diplomats.

At the G77 meeting, the most vocal country was China, a veto-wielding permanent member of the Security Council, which complained that its bank accounts were closed in 2011.

The problem was not the closed accounts per se, said a Chinese delegate, “but more serious was the issue that some countries were targeted, mostly developing countries.”

An Asian diplomat told IPS that to the best of his knowledge, the bank accounts of most, or all, Western missions were left untouched.

“Why this double standard?” he asked.

Besides China, the countries that led the protest at the G77 meeting included Bolivia (the current G77 chair), Colombia, Argentina, Iran, Kenya, Sudan, Algeria, Zimbabwe, Honduras and Sri Lanka.

Ambassador Palitha Kohona, Sri Lanka’s permanent representative to the United Nations, told IPS there has been a suggestion that the U.N. Secretariat wield its considerable commercial clout by ceasing to deal with banks which have closed the accounts of certain diplomatic missions and diplomats attached to such missions

“The U.N.’s transactions amount to many billions of dollars per year,” he noted. “If the diplomats of member states and their missions are not welcome at these banks, why should the United Nations, which is an organisation of the same member states, continue to deal with them?”

Williams said there is an underlying principle of ‘do as we say, not do as we do’.

Presumably, under the Vienna Conventions, diplomatic bank accounts should have similar protections as other diplomatic communications, but the banks would need assurances from the U.S. authorities to exempt them from the Orwellian scrutiny they subject everybody else to, he added.

“So the missions will now be forced to send cash – tending to suspicions of money laundering. Indeed, we know some missions have done just that, but U.S. insularity now gives them an excuse for their behavior,” said Williams, U.N. correspondent for the Tribune and author of “U.N. for Beginners”.

Asked for an official response, U.N.’s Deputy Spokesperson Farhan Haq told IPS the secretary-general shares the concerns of the Group of 77, and the U.N. has taken up the issue with the host country and Chase.

“The Secretariat has also initiated discussions with other financial institutions to assist with finding alternative banking arrangements for the affected missions and their staff,” he added.

For anyone who might not have realised it yet, the current crisis is demonstrating beyond a shadow of a doubt that the financial markets are the lead players in the current economic situation in Europe. Power has passed from the politicians to speculators and crooked bankers. This is a fundamental change.

Ignacio Ramonet

Every single day a staggering quantity of money floods through the markets – for example, seven billion euros worth of eurozone governments’ debt alone, according to the European Central Bank. The daily collective decisions of these markets can now topple governments, dictate policies, and subjugate entire populations.

Moreover, these new “lords of the earth” have no concern whatsoever for the common good. Solidarity is not their problem, much less the preservation of the welfare state. Greed is the only motive for their actions. Speculators and bankers, driven by a hunger for profits, behave with total impunity, diving like birds of prey on target after target.

Since the crisis broke in 2008 no serious reform has been imposed to either regulate the markets or rein in the bankers. It is apparent that banks play a clear role in the economic system and that their traditional activities ­ encouraging savings, providing families with credit, financing businesses, spurring commerce ­ are constructive.

However, since the dawn in the 1980s of the “universal bank”, which added speculation and investment to the above mix of functions, risks to customers’ savings shot up dramatically along with deceit, scandals, and fraud.

One of the most shameless acts was carried out by Goldman Sachs, which now dominates the financial universe. In 2001 it helped Greece to cook its books so that Athens would meet the conditions to join the euro.

In under seven years, this scam was discovered and the reality exploded like a bomb. The consequence: a debt crisis engulfed almost an entire continent; Greece was sacked and forced onto its knees; recession struck, with massive unemployment and plummeting buying power of workers; restructuring and drastic cuts in social services followed, with widespread misery and the imposition of structural adjustment programmes.

How were the perpetrators of this devastating swindle punished? Mario Draghi, the ex-vice president of Goldman Sachs for Europe who was aware of most of the fraud, was named president of the European Central Bank. Meanwhile, for its crooked window-dressing for Greece, Goldman charged 600 million euros. The story has a clear moral: when it comes to major rip-offs by the banks, impunity is the rule.

For confirmation look no further than the thousands of Spanish depositors who bought stocks in Bankia the day it was listed on the stock market. It was known that the bank had no credibility and that according to the ratings agencies its stock was just a step above junk.

But the depositors trusted Rodrigo Rato, then president of Bankia and ex-managing director of the International Monetary Fund, who proclaimed on May 2, 2012 (five days before resigning in response to market pressure and just before the Spanish government had to inject 23.5 billion euros to keep it out of bankruptcy): “In terms of both liquidity and solvency, we are in a very robust position.”

It is known that a year earlier, in July 2011, Bankia apparently passed the “stress test” imposed by the European Banking Authority (EBA) on the 91 largest financial businesses in Europe. This should give an idea of the incompetence and ineptitude of the EBA, the European agency charged with guaranteeing the health of our banks.

But that wasn’t the end of the scandals. Indeed, new bank frauds have come to light in recent months. HSBC was accused of money laundering for Mexican narco-traffickers. J.P. Morgan engaged in massive speculation and unprecedented risk-taking that led to losses of 7.5 billion euros and ruined dozens of clients. The same happened at Knight Capital, which lost over 323 million euros in a single night because of a mistake by its automatic trading programme.

But the scandal that is most infuriating on a global scale is the Libor. The Association of British Bankers issues each day what is called the “London Interbank Offered Rate”, an average calculated by Reuters financial news agency of the interest rates obtained by the 16 largest banks for borrowing.

As the rate at which the major banks lend money to each other, Libor constitutes a fundamental benchmark for the entire world financial system. In particular, it is used to calculate mortgage rates for homeowners. Worldwide, Libor influences some 350 trillion euros in credit and any variation in it can have a colossal effect.

How did this scam work? Some of the 91 Libor banks colluded in lying about the rates they were obtaining, thus manipulating not only Libor but all derivative contracts and the credit rates for businesses and families alike. This went on for years.

Investigations have shown that about ten major international banks ­ Barclays, Citigroup, JP Morgan Chase, Bank of America, Deutsche Bank, HSBC, Credit Suisse, UBS, Societe Generale, Credit Agricole and the Royal Bank of Scotland ­ participated in the racket.

What we see from the Libor disaster is that criminal behaviour has infected the very heart of the financial industry, and that probably millions of families were issued mortgages at incorrect rates. Many had to leave their homes. Others were evicted because they couldn’t pay artificially-manipulated interest rates. And once again the authorities charged with overseeing the operation of the markets turned a blind eye to this crime. No one has been punished beyond four schemers.

How long can democracies continue to allow such impunity? In 1932 in the United States, Ferdinand Pecora, son of Italian immigrants who became a prosecutor in New York, was named by president Herbert Hoover to investigate the responsibility of the banks for the crash of 1929. His report was overwhelming. It was he who coined the term “banksters” (out of “bankers'” and “gangsters”).

On the basis of this report, president Franklin D. Roosevelt acted to protect the American people from the risks of speculation. He passed the “Glass-Stegall Act” which (until it was repealed in 1999) required the separation of commercial banking from investment banking. What government of the eurozone would dare pass similar legislation today? (END/COPYRIGHT IPS)

* Ignacio Ramonet is editor of Le Monde diplomatique en español.