BNP Pleads Guilty to Criminal Charges Over Sanctions Violations, Pays $8.8B Fine

BNP Paribas SA (BNP) has pleaded guilty to criminal U.S. charges that it violated sanctions. As part of the plea deal, the bank will pay an $8.8 billion fine.

According to the allegations, BNP processed funds involving Cuba, Iran and Sudan. The bank pleaded guilty to conspiracy, falsifying bank records, and conspiring to violate the International Emergency Economic Powers Act. It will not be allowed to clear U.S. dollars for up to a year. This suspension is significant, since dollar clearing is key to doing business with international clients.

With the BNP case, authorities are making it clear that no bank is immune from criminal charges. The probe revolved around its commodity-trade finance enterprises in Geneva, Switzerland and Paris, France. Unauthorized dollar payments were made for oil companies to entities in Iran and Sudan.

The New York Department of Financial Services said that over $190 billion in transactions that occurred between 2002 and 2012 involved the bank giving dollar-clearing services to Iranian, Sudanese, and Cuban parties. Documents indicate that BNP knowingly hid these transactions under high-level management’s orders. The concealments occurred to avoid detection by investigators.

The probe and negotiations were so significant that high-level government officials in the U.S. and France, including President Francois Hollande, became involved in negotiations. Earlier this month, Hollande noted that issuing a huge penalty against BNP would hurt not just the bank but perhaps even the entire financial system in Europe. France’s central bank also stepped in, contending that BNP never violated European or French law with its actions. The U.S., however, said that it had jurisdiction because dollars were used in the transactions involving the sanctioned nations.

In the wake of the probe, BNP parted ways with 13 employees. New York’s regulatory had called for individuals to be held accountable. In total, 45 BNP employees were disciplined. Those who were not let go were demoted, given warnings, or experienced salary cuts. None of these individuals, however, are facing criminal charges

Still under investigation over possible sanctions violations are Credit Agricole S (ACA) and Societe Generale SA (GLE). Since Barack Obama has been president, 21 other banks have collectively been fined $4.9 billion for transactions involving sanctioned nations.

Prosecutors believe that BNP deserved a more severe penalty than the other entities because its wrongdoing was much more egregious and the bank failed to cooperate fully with the investigation. BNP’s nearly $9 billion penalty is the biggest fine ever for violation of U.S. economic sanctions. Issuing a statement, BNP chief executive Jean-Laurent Bonafe chief said that the bank regretted the misconduct, which resulted in the settlement. BNP has since redesigned its compliance measures.

BNP Paribas Pleads Guilty in Sanctions Case, The New York Times, June 30, 2014

BNP Paribas Draws Record Fine for ‘Tour de Fraud’, The Wall Street Journal, June 30, 2014

BNP to Pay Almost $9 Billion in U.S. Sanctions Plea Deal, Bloomberg, June 30, 2014

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