On 30th June 2014, France’s largest bank BNP Paribas SA agreed to plead guilty to violations of US sanctions and agreed to pay a record $8.97 billion in a settlement with US prosecutors. This is the largest penalty so far imposed by US regulators on banks. In addition to this fine, the agreement includes a rare year-long suspension of the bank’s ability to convert foreign currency into U.S. dollars through its New York office, a step that could potentially cripple one of the bank’s chief functions.
The reasons for this imposition of penalties on BNP Paribas SA are as under :
• The investigations into deals BNP Paribas SA began in 2009 when an informant alerted Manhattan District Attorney’s office about their commodity trade finance business in Paris and Geneva.
• BNP Paribas SA admitted in court documents that it processed almost USD 9 billion in banned transactions from 2004 to 2012 involving Sudan, Iran and Cuba.
• Sudan Deals: The majority of illegal payments were made on behalf of sanctioned entities in Sudan. BNP Paribas SA is alleged to have used “satellite banks” to disguise transactions, processed about USD 6.4 billion through the US from July 2006 and June 2007 on behalf of Sudanese entities.
• Iranian Deals: BNP Paribas SA is alleged to have persisted in doing business with Iran even after investigations began. The illicit transactions included dealings with a Dubai based oil company that was a front for an Iranian Petroleum firm, as per US Justice Department.
• Cuban Deals: BNP Paribas SA is alleged to have provided more than USD 1.7 billion financing through its headquarters to Cuban banks and other entities from at least 2000 to 2010.
• US Attorney General said that “BNP Paribas SA went to elaborate lengths to conceal prohibited transactions, cover its tracks and deceive US Authorities”
• US has imposed sanctions against Iran in 1979 and Sudan in 1997. Embargo on Cuba is in place since 1960.
What Authority the U S Has to impose penalties:
Though the alleged transactions took place in different places outside US, the US claimed jurisdiction because the transactions were processed in dollars.
Frances’s central bank has said that BNP Paribas SA has not violated French and European laws.
France’s central bank has further said that imposition of these penalties may may encourage companies to stop using dollars in international transactions.
(Based on media reports)