There seem to be more and more huge billion dollar settlements by banks for wrongdoing. Earlier this week, the U.S. Department of Justice (DOJ) announced an agreement with Bank BNP Paribus (BNPP) where the bank has agreed to plead guilty for illegal financial transactions with countries under U.S. sanctions. The French bank allegedly violated:
"... the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA) by processing billions of dollars of transactions through the U.S. financial system on behalf of Sudanese, Iranian, and Cuban entities subject to U.S. economic sanctions. The agreement by the French bank to plead guilty is the first time a global bank has agreed to plead guilty to large-scale, systematic violations of U.S. economic sanctions."
Investigations found that the bank processed $8.8 billion in illegal financial transactions with sanctioned entities.To avoid detection, the bank allegedly routed illegal payments through third-party banks and instructed other banks not to disclose the names of sanctioned entities in those transactions.
The bank entered a written plea agreement and will pay total financial penalties of $8.9736 billion, including a forfeiture of $8.8336 billion and a fine of $140 million. The DOJ annouced additional terms of the plea agreement:
"BNPP will waive indictment and be charged in a one-count felony criminal information, filed in federal court in the Southern District of New York, charging BNPP with knowingly and willfully conspiring to commit violations of IEEPA and TWEA, from 2004 through 2012."
The bank is scheduled to formally enter its guilty plea in United States District Court on July 9, 2014 at 4:30 p.m. Deputy Attorney General James M. Cole said:
"BNPP ignored US sanctions laws and concealed its tracks. And when contacted by law enforcement it chose not to fully cooperate... This failure to cooperate had a real effect -- it significantly impacted the government’s ability to bring charges against responsible individuals, sanctioned entities and satellite banks. This failure together with BNPP’s prolonged misconduct mandated the criminal plea and the nearly $9 billion penalty that we are announcing today.”
Assistant Attorney General Caldwell 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... In doing so, BNPP deliberately disregarded U.S. law of which it was well aware, and placed its financial network at the services of rogue nations, all to improve its bottom line. Remarkably, BNPP continued to engage in this criminal conduct even after being told by its own lawyers that what it was doing was illegal.”
"BNP Paribas also accepts a temporary suspension of one year starting 1st January 2015 of the USD direct clearing focused mainly on the Oil & Gas Energy & Commodity Finance business line in certain locations... BNP Paribas will maintain its licenses as part of the settlements, and expects no impact on its operational or business capabilities to serve the vast majority of its clients... "
In its press release, the bank announced new internal compliance and control processes:
"... a new department called Group Financial Security US, part of the Group Compliance function, will be headquartered in New York and will ensure that BNP Paribas complies globally with US regulation related to international sanctions and embargoes... all USD flows for the entire BNP Paribas Group will be ultimately processed and controlled via the branch in New York. As a result of BNP Paribas’ internal review, a number of managers and employees from relevant business areas have been sanctioned, a number of whom have left the Group."
The bank generated annual revenues in 2013 of Euros 36.1 million. The current exchange rate: 1.0 Euro = 1.37 U.S. dollars.
I congratulate government officials for the investigations and for enforcing the law. I look forward to the results of investigations of banks that worked with BNP Paribus to hide the illegal transaction. However, I have only one question: why are no BNP Paribus bank executives going to prison? The criminal conduct seems to warrant prison time.
What are your opinions of the plea agreement by Bank BNP Paribus?