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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