French banking giant BNP Paribas entered into a guilty plea this week and a record $8.9 billion settlement with the Department of Justice for economic sanctions violations.
The settlement represents the largest penalty ever obtained by the Justice Department in a criminal economic sanctions case, and the largest in a criminal case involving a bank. It also marks the first time a global bank has agreed to plead guilty to large-scale, systematic violations of U.S. economic sanctions.
BNP Paribas is scheduled to formally enter its guilty plea before U.S. District Judge Lorna Schofield in the Southern District of New York on July 9. The plea agreement, subject to approval by the court, provides that the bank will pay total financial penalties of $9 billion, including forfeiture of $8.8 billion and a fine of $140 million.
According to court documents, BNP Paribas agreed to waive indictment and enter into a guilty plea for knowingly and willfully conspiring to violate the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA) from 2004 through 2012 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.
“BNP Paribas went to elaborate lengths to conceal prohibited transactions, cover its tracks, and deceive U.S. authorities. These actions represent a serious breach of U.S. law,” Attorney General Eric Holder said in a statement. “If sanctions are to have teeth, violations must be punished. Banks thinking about conducting business in violation of U.S. sanctions should think twice because the Justice Department will not look the other way.”
In a statement, Deputy Attorney General James Cole said BNP's failure to fully cooperate with law enforcement “significantly impacted the government's ability to bring charges against responsible individuals, sanctioned entities, and satellite banks. This failure together with BNP's prolonged misconduct mandated the criminal plea and the nearly $9 billion penalty.”
BNP Paribas further continued to engage in this criminal conduct even after being informed by its own lawyers that what it was doing was illegal. “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,” said Assistant Attorney General Leslie Caldwell. “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.”
According to documents, over the course of eight years, BNP Paribas knowingly and willfully moved more than $8.8 billion through the U.S. financial system on behalf of sanctioned entities, including more than $4.3 billion in transactions involving entities that were specifically designated by the U.S. government as being cut off from the U.S. financial system. BNPP engaged in this criminal conduct through various sophisticated schemes designed to conceal from U.S. regulators the true nature of the illicit transactions.
BNP Paribas routed illegal payments through third-party financial institutions to conceal not only the involvement of the sanctioned entities, but also its role in facilitating the transactions. The bank also instructed other financial institutions not to mention the names of sanctioned entities in payments sent through the United States and removed references to sanctioned entities from payment messages to enable the funds to pass through the U.S. financial system undetected.
BNP Paribas also pleaded guilty in New York State Supreme Court to falsifying business records and conspiring to falsify business records. Additionally, the Board of Governors of the Federal Reserve System announced that the bank has agreed to a cease and desist order, to take certain remedial steps to ensure its compliance with U.S. law in its ongoing operations, and to pay a civil monetary penalty of $508 million.
BNP Paribas further agreed to terminate or separate from the bank 13 employees, including the group chief operating officer and other senior executives; 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; extend for two years the term of a monitorship put in place in 2013; and pay a $2.2 billion monetary penalty to New York State Department of Financial Services.
"Individual failings were discovered in this business," BNP Paribas Chief Executive Officer Jean-Laurent Bonnafé said in a statement. "Certain employees deliberately circumvented U.S. rules and did not comply with General Management's decisions that prohibited this business in the countries concerned as from 2007. Aside from these individual failings, there was also a lack of vigilance and responsiveness."
In satisfying its criminal forfeiture penalty, BNP Paribas will receive credit for payments it is making in connection with its resolution of these related state and regulatory matters. The Treasury Department's Office of Foreign Assets Control also levied a fine of $963 million, which will be satisfied by payments made to the Department of Justice.
The agreement with BNP Paribas marks the seventh major case involving sanctions violations by a large international bank since 2009, resulting in the total forfeiture of approximately $12 billion. Other banks that have paid fines to settle U.S. charges of breaching sanctions against Cuba, Libya, Iran, and Sudan include Barclays, Credit Suisse, Royal Bank of Scotland, and Standard Chartered.
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