Lawsky Prepared to Name Individuals at BNP in Crackdown

New York’s top bank regulator Benjamin Lawsky says he’s prepared to identify individual bankers by name to deter misconduct in the financial sector, starting with a BNP Paribas SA settlement over laundering funds from sanctioned countries including Iran.

“It’s easy to settle with corporations,” said the superintendent of New York’s Department of Financial Services in an interview March 12 at his lower Manhattan office. “If you don’t do something about individual conduct, you’re proceeding down the same path. It happens again and again and again.”

Lawsky’s desire to name individuals echoes public sentiment that bankers haven’t been made accountable enough for the financial crisis. Extracting fines from large institutions -- which are ultimately paid for by shareholders -- hasn’t been enough to deter misconduct.

Lawsky, who has shown a willingness to chart his own path as a regulator, said he’s planning to identify at least one BNP individual, though the terms of the settlement could still change.

Lawsky wields civil enforcement powers over banks and insurance companies licensed in New York. Any decision to bring criminal charges against individuals would be up to Preet Bharara, the U.S. Attorney in Manhattan, and Cyrus Vance, the Manhattan District Attorney, who are also involved in the settlement negotiations.

Real Consequences

“You want to be very clear up front about what they did wrong and that there are real consequences,” Lawsky said. “And it will affect their careers going forward.”

BNP, France’s largest bank, said last month it’s set aside $1.1 billion in connection with the U.S. review of payments to parties subject to economic sanctions violations. The BNP probe focuses on dealings with Iran, Sudan and Cuba, a person familiar with the matter told Bloomberg News last month.

In addition to Lawsky, Bharara, and Vance, the Federal Reserve and the U.S. Treasury Department’s Office of Foreign Assets Control are also part of the settlement discussions, the person said. Spokespeople for Bharara and Vance declined to comment on whether settlement discussions are taking place over BNP or whether individuals would be charged.

Barbara Hagenbaugh, a spokeswoman for the Federal Reserve and Cesaltine Gregorio, a BNP spokeswoman, declined to comment on the matter, as did Hagar Chemali, a spokeswoman for OFAC.

In his 2 1/2 years as the state’s top banking regulator, Lawsky has made a priority of combating money laundering, payday lending, debt collection and mortgage servicing cases. He’s been willing to upend the status quo in the belief that regulators are too cozy with the companies they regulate.

Fellow Regulators

In August 2012, Lawsky broke with fellow regulators and threatened to pull Standard Chartered Plc’s license to operate in New York over allegations that the London-based bank violated U.S. laws regarding financial transactions with Iranian clients.

He supported his action in a consent order that cataloged the breadth of Standard Chartered’s questionable business dealings with Iran, and released evidence showing that the bank made efforts to avoid getting caught by U.S. regulators.

Standard Chartered reached a $340 million settlement with Lawsky’s office and agreed to hire a monitor. Separately the bank reached a $327 million settlement to resolve related issues with other regulators, including the Fed, the Treasury Department and the Manhattan district attorney.

In a December settlement with Royal Bank of Scotland Group Plc, Lawsky identified two RBS bankers by job description, though not by name.

Frustrated by repeating patterns of transgressive behavior in the financial sector, Lawsky said he wants to increase the consequences for violators by singling out people by name.

“If it’s not money laundering, it’s tax evasion,” he said. “If it’s not tax evasion, it’s forex manipulation. It’s one thing after another. It makes us wonder, as regulators, what are we doing wrong?”

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