French bank, BNP Paribas, agreed to pay almost US$9 billion to settle allegations that it violated U.S. economic sanctions.
The bank agreed to a comprehensive settlement with U.S. authorities to resolve an investigation into the alleged processing of billions of dollars of transactions through the U.S. financial system on behalf of Sudanese, Iranian, and Cuban entities that were subject to U.S. economic sanctions. The agreement is the first time a global bank has agreed to plead guilty to large-scale, systematic violations of U.S. economic sanctions, U.S. authorities note.
Under the settlement, the bank has pled guilty to violations of certain U.S. laws and regulations regarding economic sanctions against certain countries and related recordkeeping. It also agreed to pay a total of US$8.97 billion (€6.6 billion), which will result in an exceptional charge of €5.8 billion to be booked in the second quarter of 2014. It has also been suspended for a year from U.S. dollar direct clearing focused mainly on the energy & commodity finance business line in certain locations, starting in Jan. 2015.
The deal resolves allegations from the U.S. government that the bank “knowingly and willfully moved more than $8.8 billion through the U.S. financial system on behalf of sanctioned entities, including more than $4.3 billion in transactions involving entities that were specifically designated by the U.S. government as being cut off from the U.S. financial system.” It also said that the bank “engaged in this criminal conduct through various sophisticated schemes designed to conceal from U.S. regulators the true nature of the illicit transactions.”
The bank is scheduled to formally enter its guilty plea before a U.S. district court judge on July 9. The plea agreement, which is subject to approval by the court, provides that it will pay total financial penalties of US$8.9736 billion, including forfeiture of US$8.8336 billion and a fine of US$140 million.
BNP Paribas says that it will maintain its banking licenses as part of the settlements, and expects no impact on its operational or capability to serve the vast majority of its clients. It has also adopted new compliance and control procedures to prevent future violations; and, it says that a number of managers and employees have been sanctioned, and some have left the bank.
“We deeply regret the past misconduct that led to this settlement,” said Jean-Laurent Bonnafe, CEO of BNP Paribas. “We have announced today a comprehensive plan to strengthen our internal controls and processes, in ongoing close coordination with the U.S. authorities and our home regulator to ensure that we do not fall below the high standards of responsible conduct we expect from everyone associated with BNP Paribas.”
The massive deal includes agreements with the U.S. Department of Justice, U.S. Attorney’s Office for the Southern District of New York, the New York County District Attorney’s Office, the Board of Governors of the U.S. Federal Reserve System, the New York State Department of Financial Services, and the U.S. Department of the Treasury’s Office of Foreign Assets Control.
“BNP Paribas went to elaborate lengths to conceal prohibited transactions, cover its tracks, and deceive U.S. authorities. These actions represent a serious breach of U.S. law,” said U.S. attorney general, Eric Holder. “Sanctions are a key tool in protecting U.S. national security interests, but they only work if they are strictly enforced. If sanctions are to have teeth, violations must be punished. Banks thinking about conducting business in violation of U.S. sanctions should think twice because the Justice Department will not look the other way.”