French Bank Agrees to Record U.S. Penalty
The world's fourth-largest financial institution agreed this week to pay record penalties of nearly $9 billion for processing transactions through the U.S. financial system on behalf of entities subject to U.S. economic sanctions.
Paris-based BNP Paribas agreed to plead guilty in U.S. federal court for conspiring to violate the International Emergency Economic Powers Act and the Trading with the Enemy Act, according to the FBI.
This is the first time a global bank has agreed to plead guilty to large-scale, systematic violations of U.S. economic sanctions, the FBI said.
“By providing dollar clearing services to individuals and entities associated with Sudan, Iran, and Cuba–in clear violation of U.S. law–BNPP helped them gain illegal access to the U.S. financial system,” Acting Assistant Attorney General Caldwell said in a news release announcing the agreement.
The French bank deliberately disregarded U.S. law and placed its financial network at the services of rogue nations, all to improve its bottom line, Caldwell said.
“Remarkably, BNPP continued to engage in this criminal conduct even after being told by its own lawyers that what it was doing was illegal,” he added.
BNPP agreed to waive indictment and be charged in a one-count felony criminal information, filed in federal court in the Southern District of New York. The bank is scheduled to formally enter its guilty plea on July 9.
In entering the plea agreement, BNPP admitted to illegally moving more than $8.8 billion through the U.S. financial system from 2004 to 2012.
“BNP Paribas went to elaborate lengths to conceal prohibited transactions, cover its tracks, and deceive U.S. authorities,” Attorney General Eric Holder said at a news conference the Department of Justice in Washington, D.C. “These actions represent a serious breach of U.S. law.”
In August 2007, BNPP announced it could not determine the value of its positions in collateralized debt obligations that had exposure to subprime mortgages. The admission was the tipping point for the subprime mortgage market, according to industry experts.
In the latest case, BNPP routed illegal payments through third-party financial institutions to conceal the involvement of the sanctioned entities and instructed other financial institutions not to mention the entities’ names in payments processed in the U.S., according to the FBI.
If the plea agreement is approved by the court, BNPP will be forced to forfeit $8.83 billion and pay a $140 million fine, prosecutors said.
The New York County District Attorney’s Office also announced that BNPP pleaded guilty in New York State Supreme Court to falsifying business records.
In response to the barrage of legal activity, the Board of Governors of the Federal Reserve System required BNPP to enter into a cease-and-desist order. In that case, the bank must also pay a civil monetary penalty of $508 million and take steps to ensure compliance with U.S. law in ongoing operations, the FBI said.
The New York State Department of Financial Services also announced that BNPP agreed to terminate or separate from the bank 13 employees, including senior executives, and to suspend U.S. dollar clearing operations through its New York branch and other affiliates for one year for business lines on which the misconduct centered. In addition, the bank will pay a $2.2 billion penalty to DFS and a monitorship put in place in 2013 will be extended two years.
In satisfying its criminal forfeiture penalty, BNPP will receive credit for payments it is making in connection with its resolution of these related state and regulatory matters, the FBI said.
The Treasury Department’s Office of Foreign Assets Control has also levied a fine of $963 million, which will be satisfied by payments made to the Justice Department, the FBI said.