Fifa corruption: The officials are caught in the web of US legal imperialism - where double standards don't get in the way

Out of America: The executives ensnared by America's extraterritorial authority are only the latest examples of this fearsome power

(Reuters)

In the case of the United States and its dominant role in the world, it’s not just a matter of hard power and soft power. You may be cowed by America’s ability to project overwhelming force into every corner of earth. You may be won over by the charms of Hollywood, Beyoncé or Kentucky Fried Chicken. But if neither hard nor soft does the trick, then watch out for American legal power.

For proof, look no further than the extraordinary goings-on in Zurich and New York last week, as Fifa executives were carted off at dawn from the Baur au Lac hotel by Swiss police, and the US attorney general and the director of the FBI unveiled charges of “rampant, systematic and deep-rooted corruption” involving world football’s governing body, dating back decades.

What spurred the investigation by American prosecutors is a matter of speculation. Maybe it was anger at the country’s failed bid to host the 2022 World Cup, amid suspicions that bribes were paid to garner votes for Qatar. Maybe it reflects a desire to wield greater influence on a sport that increasingly captivates America as well, or even the US legal system’s traditional abhorrence of white-collar crime.

But the pertinent question is: what’s this got to do with the US in the first place? After all, none of the seven Fifa officials arrested and now facing extradition are American citizens, and most of the alleged crimes did not involve Americans. Nor were they on US soil at the time. That, however, is to ignore the extraterritorial powers uniquely claimed by US law, and how little it takes to be caught by the prosecutorial net.

Channel a single transaction through the US banking system, communicate just once on the US phone system or via an American internet provider, or even make a layover at Kennedy airport during the period of your presumed wrongdoing – for the authorities here that is jurisdiction enough. And the foreign countries whose collaboration is required usually go along. Who wants to get on the wrong side of the world’s superpower?

Not that many tears are being shed for the Zurich Seven. Indeed, the US is being praised for doing what no other country would or could do, and tackling the endemic corruption at Fifa head-on. Loretta Lynch, the new attorney general, has become an improbable heroine of football fans the world over, as they collectively exhale “God Bless America”. But the Fifa case is very much the exception.

Deep down, you can’t help feeling, the biggest force behind America’s prosecutorial zeal overseas is a modern version of the mission civilisatrice embraced by the 19th-century colonial powers of Britain and France – a 21st-century drive by the US to export its values, this time via its criminal, tax, and regulatory laws, in an expression of American hegemony that some call “legal imperialism”.

And, as usual with great powers, blatant double standards don’t get in the way. Exuding moral superiority, the US claims that virtually any criminal on the planet is fair game. But its own government refuses to join the UN’s International Criminal Court which could subject US military personnel and politicians to a global standard of justice. Do as we say, in other words, not as we do.

Arguably, however, the most effective exercise of this “legal imperialism” is in the financial field. For which thank the global importance of the dollar, as irresistible in its way as all the might of the Pentagon. Take, for example, the record fine of $8.9bn imposed last year on the French bank BNP for violating US sanctions on Iran and Cuba.

No country has a longer history than France of giving two fingers to the Americans from time to time, and Paris might have got on its high horse about an attack on national sovereignty and the country’s flagship bank. Instead, like all the other foreign banks that have paid massive US fines for various misdeeds, BNP merely grumbled and went along. It had no choice. Had the bank refused to pay, it would have been barred from US financial markets – a virtual kiss of death.

Buttressing this reality are various acts of Congress enshrining America’s claim to extraterritorial authority. One is the Foreign Corrupt Practices Act (FCPA) of 1977, banning bribery of foreign officials, not just by American companies and individuals, but also by any foreign company whose shares are traded on US markets. That’s why the Justice Department launched an investigation (now closed) into bribes of police officials by British papers owned by Rupert Murdoch’s News Corporation, which is based in the US.

But the most toxic ingredient in this legislative alphabet soup is Fatca, or Foreign Account Tax Compliance Act, passed in 2010 with the seemingly reasonable aim of flushing out money hidden in bank accounts abroad by wealthy Americans. The result has been a shambles.

The US is one of only two countries on earth that levies taxes based on citizenship rather than residence (the other is Eritrea), and the main effect of Fatca has been to make life a misery for many less than super-rich American expatriates who must now report their every dealing to the Internal Revenue Service, and find themselves shunned by their local banks, terrified of entanglement with the US tax authorities.

Last year, a record 3,415 Americans living abroad gave up their citizenship rather than endure the hassle. Just ask our own Boris Johnson, born in the US and thus automatically an American citizen. No problem until he was hit by a six-figure bill from the IRS on the capital gains from the sale of his home in London. “Outrageous,” he called it, but, like everyone else, Johnson coughed up. He now plans to renounce his citizenship.

I, too, have been caught in the backwash of Fatca. As a US taxpayer, I now declare all my London accounts to the IRS, including pensions. Fine, until I tried to get some advice from those pension funds and their advisers on investment strategy. Sorry, they said, but, as you’re a US resident, we can’t help. Various reasons were advanced, but the real one was fear of the extraterritorial powers of the IRS. It almost makes you sympathise with the Zurich Seven.