Tuesday, July 1, 2014

Global Impact: BNP Paribas, France's Biggest, Agrees to Pay $9 Billion for Violating US Trade Sanctions

According to The Associated Press, France's largest bank, BNP Paribas, has agreed to pay nearly $9 billion to resolve criminal allegations that it processed transactions for clients in Sudan and other blacklisted countries in violation of US trade sanctions, the US Justice Department announced on Monday (June 30). 

BNP pleaded guilty to state charges in New York and plans another guilty plea in federal court next month.
After months of negotiations, BNP admitted to violating US trade sanctions by processing billions of dollars in illegal transactions on behalf of clients in Sudan, Cuba and Iran. The United States had imposed sanctions on the countries to block their participation in the global financial system.

The transactions, which prosecutors say were processed through its New York branch office from at least 2004 through 2012, were handled at the same time as human rights abuses — including the genocide in Sudan — were occurring in those nations.

COMMENT: The goal of trade sanctions is to cut off an adversary's access to banks and other sources of capital, limiting its economic growth and ability to buy weapons, food and other items available in the global marketplace.

The restrictions on dealings with sanctioned countries generally apply to US banks and foreign banks with US operations, or those nations who have instituted trade sanctions against rogue countries.

The $8.9 billion deal is the largest sanctions case brought by the US Justice Department and the largest penalty in any criminal case involving a bank. 

Prosecutors say the penalty was necessary not only because of the sheer volume of the illicit transactions, but also because of the bank's efforts to conceal them and bank executives' lack of cooperation with the Justice Department.

As the BNP deal inched closer to culmination, French officials in recent weeks had expressed deep concern about the punishment. They lobbied for White House intervention and warned that a large penalty could affect the entire European economy and hold up a trans-Atlantic free trade agreement.

The French economy minister last week asked the US Justice Department to be "fair and proportionate" in deciding on the potential penalty. President Francois Hollande wrote to the Obama administration in April asking for a "reasonable" solution, though President Barack Obama deflected calls to get involved in the dispute.

Paris-based BNP on Monday (June 30) entered a guilty plea in state court in New York City to falsifying business records. BNP is also expected to plead guilty in federal court on July 9 for conspiring to violate the International Emergency Economic Powers Act and the Trading With the Enemy Act.

Additionally, BNP has to fire multiple senior executives and will lose for one year its ability to process certain transactions in US dollars. No individual BNP executives were charged.

HSBC, Europe's largest bank, agreed to a $1.9 billion settlement with US and New York City authorities in connection with the transfer of billions of dollars on behalf of Iran, Cuba, Libya, Sudan and Myanmar.

Standard Chartered paid $340 million in a settlement with New York State regulators, who accused the bank of scheming with the Iranian government to launder billions of dollars. The bank also paid $327 million to settle federal and New York State charges related to currency transactions for Iranian, Sudanese, Libyan and Burmese entities that were said to be concealed from regulators.