BNP Paribas SA pleaded guilty in Manhattan federal court to violating U.S. sanctions after agreeing last week to pay a record $8.97 billion to resolve state and federal probes that reached the highest echelons of French and American diplomacy.
BNP, France’s largest bank, admitted it violated the International Emergency Economic Powers Act and the Trading with the Enemy Act by processing almost $9 billion in banned transactions from 2004 to 2012 involving Sudan, Iran and Cuba. U.S. District Judge Lorna Schofield in Manhattan, accepted the plea entered today by Georges Dirani, the company’s top lawyer. She set the bank’s sentencing for Oct. 3.
The bank will be barred from U.S. dollar-clearing operations for one year beginning Jan. 1 for its oil and gas commodity-finance business, according to the agreement reached with the U.S. New York’s top banking regulator will also require 13 executives to leave the bank.
“I find the severity of the defendant’s conduct more than warrants the criminal charge to which it has pleaded,” Schofield said in accepting BNP Paribas’s plea. “The forfeiture amount will surely have a deterrent effect on others that may be tempted to engage in similar conduct, all of whom should be aware that no financial institution is immune from the rule of law.”
Assistant U.S. Attorney Andrew Goldstein outlined the totality of the bank’s crimes for the judge, citing evidence including banking records, interviews with employees and communications.
“BNP engaged in a long-running conspiracy to violate the U.S. embargoes against the Sudan, Iran and Cuba,” Goldstein said.
“BNP Paribas played a primary role in that conspiracy, with senior officials at the bank willing to employ elaborate and sophisticated techniques to enable the conspiracy to succeed,” Goldstein said. “Senior officials at the bank knew about the illicit transactions and allowed them to continue.”
The U.S. determined that BNP handled $6.4 billion for the Sudan, more than $686 million for Iran and $1.747 billion for Cuba, he said.
After U.S. authorities raised concerns with the company about the transactions, “the bank willingly chose to engage in these unlawful transactions,” according to Goldstein.
After the judge asked how the U.S. knew that the $8.97 billion fine and forfeiture encompassed the totality of the bank’s crimes, Goldstein said the government relied on an internal review of all transactions involving Sudan, Iran and Cuba conducted by an outside auditor.
Fallout from the probe reached the highest levels of the French and American governments. Overtures this year by French officials including President Francois Hollande weren’t enough to persuade the U.S. to take a more lenient approach with the Paris-based bank.
Hollande said June 4 that a disproportionately large penalty against BNP could reverberate across Europe’s financial system. He raised the issue the following evening with U.S. President Barack Obama, who said he wouldn’t intervene.
The following week, France’s central bank said BNP hadn’t violated French or European laws and that the probe may encourage companies to stop using dollars in international transactions. The U.S. claimed jurisdiction in the BNP case because the transactions were processed in dollars.
BNP said in a statement that it will retain its licenses and expects “no impact” on its operational or business capabilities. In 2015, the lender will clear U.S. dollars through a third party. The Bank of France said BNP can withstand the fine and dollar-clearing ban.
Dirani told the judge today that the bank was able to forfeit $8.83 billion and pay a fine of $140 million.
BNP pleaded guilty June 30 to New York state charges of falsifying business records and conspiracy filed by Manhattan District Attorney Cyrus Vance Jr.
While BNP’s plea would resolve the case against it, at least two other French banks are still under investigation. Societe Generale SA and Credit Agricole SA, respectively France’s No. 2 and No. 3 banks by market value, have said in company filings this year that they are conducting internal reviews and cooperating with U.S. authorities regarding dollar transactions involving embargoed countries.
Schofield asked Goldstein whether this was the only prosecution to expect from the U.S. probe. Goldstein said the investigation of individuals is continuing and the plea agreement doesn’t prevent the government from pursuing further prosecutions.
BNP’s penalty dwarfs the combined $4.9 billion levied against 21 other banks for transactions tied to sanctioned countries since Obama took office. Vance said in a phone interview that BNP’s conduct was more egregious than previous sanctions cases because of the bank’s “concerted effort over a period of time to hide from federal and state government the extent” of the transactions.
The case is U.S. v. BNP Paribas SA, U.S. District Court, Southern District of New York (Manhattan).