Bank facing $2B in fines over US sanctions violations

An internal probe found France's BNP breached sanctions against Iran and other countries. But it's not clear if authorities will move forward with charges.

By MSN Money staff Apr 30, 2014 5:51PM

A customer uses an automated teller machine (ATM) outside a branch of BNP Paribas SA bank in Jouars-Pontchartrain, France © Balint Porneczi/Bloomberg via Getty ImagesBy Noémie Bisserbe, Christopher M. Matthews and Andrew R. Johnson, The Wall Street Journal


Wall Street Journal on MSN MoneyBNP Paribas is facing fines of about $2 billion as well as criminal charges for violating U.S. economic sanctions against several countries including Iran, according to people with direct knowledge of the matter, part of an accelerating crackdown by American authorities that has caused upheaval among European banks.

An internal probe by France's largest listed bank found that it breached sanctions against Iran and tried to cover up these transactions by altering trades to remove coding that would identify their origin, a process known as stripping, said one of the people. U.S. authorities are weighing criminal charges also against individual employees, the person said.

If the government goes ahead with criminal charges against the parent of the Paris-based bank, it could lead to the first guilty plea by a bank in decades. Negotiations are continuing and a guilty plea isn't certain, said one of the people. Any deal could fall apart.

In recent years, U.S. authorities have aggressively pursued and fined European financial institutions active in countries subject to U.S. sanctions. BNP, currently in negotiations with U.S. authorities, is getting closer to becoming the 10th financial institution to settle such allegations.

Investigators have in the past been reluctant to criminally charge a financial institution because of concerns it could have a destabilizing impact on depositor and investor confidence. On Wednesday, the market reaction was relatively muted, however, suggesting the fallout could be less severe. BNP shares were down 3.5 percent while its credit default swaps, which measure the perceived risk of the bank defaulting on its debt, barely moved.

Prosecutors have in recent weeks met with BNP's banking regulators, including New York financial regulator Benjamin Lawsky, the Treasury Department's Office of Foreign Assets Control and the Federal Reserve Bank of New York, to ensure that such a move wouldn't trigger automatic debarments, like the revocation of the bank's charter, one of the people familiar with the matter said.

While the exact amount is yet to be defined, a fine of about $2 billion would be a record, said people with direct knowledge of the matter. A settlement with BNP could come within weeks, said one of the people.

A spokesperson for BNP declined to comment.

The bank could still avoid criminal charges if U.S. authorities agree to settle allegations as part of a deferred prosecution agreement. "These agreements are less damaging for companies, even if U.S. authorities can still press criminal charges against some employees," said Astrid Mignon-Colombet, a Paris-based lawyer who isn't involved in the case.

Over the past five years, Barclays; ABN Amro, now part of Royal Bank of Scotland Group; Lloyds Banking Group; Clearstream; ING (ING); Crédit Suisse Group; Standard Chartered; and HSBC Holdings have collectively paid more than $5 billion in fines to settle charges by U.S. authorities that they violated sanctions against Iran, Libya, Sudan or Cuba.

BNP said in a statement disclosing its quarterly results Wednesday that it may end up paying much more than the $1.1 billion it has previously set aside to settle investigations with U.S. agencies.

The French bank said "there is the possibility that the amount of the fines could be far in excess of the amount of the provision." BNP said discussions with U.S. authorities "demonstrate that a high degree of uncertainty exists as to the nature and amount of penalties that the U.S. authorities could impose on the bank."

BNP disclosed in February that it had booked the hefty provision after an internal probe showed "a significant volume of transactions" from 2002 to 2009 that could be "considered impermissible under U.S. laws and regulations including, in particular, those of the Office of Foreign Assets Control."

BNP Paribas employs over 15,000 people in the U.S., including about 11,760 at Bank of the West, a retail lender that counts close to 800 branches across the west and Midwest of the U.S.

BNP's French rivals Société Générale and Crédit Agricole are also in talks with U.S. authorities about potential sanction breaches, according to corporate filings.

More from The Wall Street Journal

Tags: ING
Apr 30, 2014 11:32PM
We do have enough sanction laws and regulations. Do not bother to create new laws, enforce the current laws. Nobody is above the laws and time to stop these crooks to undermine us. The damages are beyond repair in a long term.
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