Courting the special relationship
British institutions are now the leading target of financial misconduct investigations by authorities in the United States.
U.S. regulators submitted 203 requests for assistance to the United Kingdom’s Financial Conduct Authority in 2017, the most by any country, and a 17% increase on the year before. The U.S. accounted for almost one in five of all requests received by the FCA from foreign enforcement agencies.
Agencies such as the Commodity Futures Trading Commission and the Securities and Exchange Commission have sought information ranging from alleged Libor rigging to market manipulation related to high frequency trading and cryptocurrency initial coin offerings.
In April, Renwick Haddow, a British citizen, was extradited to the U.S. from Morocco to face charges of wire fraud. “Haddow misappropriated funds purportedly invested in Bitcoin Store and Bar Works for his own use,” said Geoffrey S. Berman, U.S. attorney for the southern district of New York.
A number of UK-based financial institutions have been the subject of recent penalties. In May, Royal Bank of Scotland Group announced it would pay US$4.9 billion to resolve a U.S. probe into the 2008 financial crisis, while in January, HSBC forked out US$101.5 million to settle a criminal investigation into currency rigging.
“U.S. regulators are continuing to flex their extraterritorial muscles to prosecute financial misconduct that takes place in the UK, but in some way impacts the U.S. markets or U.S. citizens,” said Parham Kouchikali, a partner at the RPC law firm in London.
Taxes hit new lows
Iowa is aiming to be the lowest-taxed state in the U.S. Best known for cornfields and author Bill Bryson, the Midwest state of 3.1 million people on May 30 enacted its most far-reaching tax legislation. Republican Gov. Kim Reynolds said the US$2.86 billion cut would provide relief “for every Iowan.”
According to KCRG in Cedar Rapids, that boast is not entirely true: about two-thirds of taxpayers will pay less in tax, though. Critics say Reynolds should remember the experience of nearby Kansas, when in 2012 then-governor Sam Brownback signed into law one of the largest income tax cuts in the state’s history.
As the Atlantic noted last month, “the cuts threatened the viability of Kansas’s schools and infrastructure; in the first year they were implemented, they resulted in a $700 million revenue loss for the state.” In 2017, the Kansas legislature voted overwhelmingly to restore the old tax rates.
Drinking and riding into oblivion
Hooch and hogs could be among the American products hardest hit by European Union trade tariffs imposed in retaliation for new duties on steel and aluminum announced by Washington last month, new analysis suggests.
“As a share of total exports, the largest negative influence will be on the bourbon and whiskey industry,” say Bert Colijn, senior economist, eurozone, and Raoul Leering, head of international trade analysis, at ING, the Dutch bank.
Other sectors affected include U.S.-made motorcycles, yachts and boats, cosmetics, and iron and steel, based on nominal values that would be exposed to EU tariffs. “Because the share of their exports to the EU is not so large, these sectors will suffer less, when looking at total export revenues.”
However, a fight over automobiles will continue to be the key to escalation, according to the ING study. If U.S. President Donald Trump levies the European auto industry with a 25% tax, the impact on the European economy would be “much more significant” than that of tariffs on metals.
EU exports of vehicles to the U.S. reached US$32 billion in 2017, five times the value of European steel and aluminum exports. “If the EU retaliates again, an all-out trade war could emerge,” the ING analysts conclude.