BNP Paribas SA (BNP), the French bank facing possible penalties for violating U.S. sanctions, said it has improved risk controls to avoid a repeat of the practices targeted in the investigation.
Finding a solution to the U.S. probe is a “top priority” for France’s largest bank, Chief Executive Jean-Laurent Bonnafe told investors at the company’s annual meeting in Paris yesterday. As part of a “remediation plan,” BNP is proposing to manage from New York “all flows in dollars,” he said.
Bonnafe, 52, said he and co-Chief Operating Officer Philippe Bordenave traveled to the U.S. last week for discussions with authorities in Washington and New York. While declining to provide fresh information on the talks, Bonnafe said a quick solution of the matter would be better for the bank. He reiterated that the penalty might be significantly higher than the $1.1 billion BNP Paribas set aside in the fourth quarter.
There is “a very high uncertainty over the sanctions and namely over the amount of the penalty,” Bonnafe said.
U.S. authorities are seeking more than $3.5 billion from BNP Paribas to resolve federal and state investigations into the lender’s dealings with sanctioned countries including Sudan and Iran, according to people familiar with the matter.
The agreement, which could be the largest penalty for sanctions violations, is still being negotiated and the amount could fluctuate, said four people who asked not to be identified because the discussions are private. U.S. prosecutors are also seeking a guilty plea from BNP, people with knowledge of the matter have said. An agreement could come in the next month, the people said.
Any solution should be acceptable to all of the parties involved, Bonnafe said.
BNP Paribas fell 0.3 percent to 52.88 euros in Paris trading, bringing the decline this year to 6.7 percent. That compares with a 2.3 percent advance in the 43-member Bloomberg Europe Banks and Financial Services Index.
The bank said in 2011 that following discussions with U.S. authorities it was reviewing operations to see if it complied with sanction rules of the Office of Foreign Assets Control.
“The review has made an inventory of a significant volume of operations that were labeled in dollars and as a consequence that might be considered as not authorized with respect to the rules set by U.S. authorities,” Chairman Baudouin Prot, 62, said the meeting yesterday. The review focused on transactions made between 2002 and 2009, the bank said.
Manhattan U.S. Attorney Preet Bharara, Manhattan District Attorney Cyrus Vance Jr. and David O’Neil, the head of the Justice Department’s criminal division in Washington, are working together on the BNP Paribas investigation. Benjamin Lawsky, superintendent of New York’s Department of Financial Services, is also investigating the bank.
The BNP probe, which was conducted in part by the Federal Bureau of Investigation in New York, focuses on the bank’s dealings with Sudan, Iran and Cuba -- countries that are under U.S. economic sanctions. Prosecutors met with BNP officials last week and are still discussing settlement terms, including the type of charges and whether the parent company or a subsidiary would plead guilty, one of the people said.
Prosecutors have been reluctant to criminally charge a company after the Justice Department’s 2002 indictment of Arthur Andersen LLP caused the accounting firm to collapse and put about 85,000 people out of work.
A guilty plea would be a departure from previous sanctions cases, which typically ended with deferred prosecution agreements that spared offending companies from criminal prosecution. The largest similar settlement came in 2012 when HSBC Holdings Plc (HSBA) paid $1.9 billion over claims it broke anti-money laundering and sanctions laws. Standard Chartered Plc (STAN) agreed to pay a total of $667 million the same year over sanctions violations.
Prosecutors argue a more severe penalty against BNP is justified because the misconduct was more egregious and the bank didn’t fully cooperate with the investigation, according to one person with knowledge of the matter.
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