French bank BNP guilty of US sanctions violations

Posted on Monday, 06.30.14

French bank BNP guilty of US sanctions violations
BY ERIC TUCKER
ASSOCIATED PRESS

WASHINGTON -- 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 U.S. trade sanctions, the Justice Department announced
Monday. The bank 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 U.S. 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.

"Sanctions are a key tool in protecting U.S. national security
interests, but they only work if they are strictly enforced," Attorney
General Eric Holder said. "If sanctions are to have teeth, violations
must be strictly punished."

The goal of such sanctions is to cut off an enemy nation's access to
banks and other sources of capital, limiting its economic growth and
ability to buy weapons, food and other items available through global
trade. The restrictions on dealings with sanctioned countries generally
apply to U.S. banks and foreign banks with U.S. operations.

The roughly $8.9 billion deal is the largest sanctions case brought by
the 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 hide them and executives' lack of cooperation
with the Justice Department.

As the BNP deal inched closer, 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 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 entered a guilty plea in state court in New
York City to falsifying business records. The bank is 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.

It has also agreed to fire multiple senior executives and will lose for
one year its ability to process certain transactions in U.S. dollars. No
individual BNP executives were charged.

"We deeply regret the past misconduct that led to this settlement,"
Jean-Laurent Bonnafe, CEO of BNP, said in a statement. "The failures
that have come to light in the course of this investigation run contrary
to the principles on which BNP Paribas has always sought to operate."

The bank said in addition to provisions it has already taken, it will
book a charge of 5.8 billion euros ($7.9 billion) in the second quarter.

"It is not hyperbole to say that the most important values in the
international community — respect for human rights, peaceful
coexistence, and a world free of terrorism — depend in large part on the
effectiveness of these sanctions," said Manhattan District Attorney
Cyrus Vance Jr., who said the investigation started with a tip to his
office.

U.S. authorities in recent years have pursued other multiple big foreign
banks for sanctions violations, though those matters have been resolved
for smaller dollar figures.

HSBC, Europe's largest bank, agreed to a $1.9 billion settlement with
U.S. and New York 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 U.S. and New York charges related to currency transactions for
Iranian, Sudanese, Libyan and Burmese entities that were said to be
concealed from regulators.

Meanwhile, in two separate similar investigations in France, authorities
are also looking at Credit Agricole and Societe Generale, people
involved in the probe have said. Together with BNP Paribas, they
constitute France's top three banks.

The BNP announcement comes weeks after Credit Suisse struck a $2.6
billion plea deal with the Justice Department for helping wealthy
Americans avoid taxes. Shortly before that case was brought, Holder —
whose Justice Department has been accused of not being aggressive enough
in confronting bank misconduct — issued a video message declaring that
no bank was too large to prosecute.

Associated Press writers Marcy Gordon in Washington and Jennifer Peltz
in New York contributed to this report.

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