The US Department of Justice (DOJ) announced yesterday that BNP Paribas (BNP) has agreed to a plea agreement under which it will pay penalties of US$8.9736 billion for processing billions of dollars in transactions through the US on behalf of entities in Sudan, Iran and Cuba, countries that are subject to comprehensive US sanctions. In addition, the French bank pleaded guilty to federal and New York State criminal charges. BNP will also shut down certain of its US dollar-clearing activities for the entire calendar year 2015.
BNPs payment is more than four times the largest previous sanctions fine of US$1.9 billion paid by HSBC Holdings Plc in 2012. The DOJ asserts that BNP’s plea agreement represents the first time a global bank has agreed to plead guilty to “large-scale, systematic violations of US economic sanctions.”
According to an agreed Statement of Facts filed in US federal court in New York, from 2002 to 2012 BNP processed at least US$8.833, 600 billion through the US financial system on behalf of Sudanese, Iranian, and Cuban entities in violation of US sanctions, including at least US$4.3 billion involving blacklisted entities and individuals known as Specially Designated Nationals, or SDNs. In order to conceal that the transactions were subject to sanctions, the Statement of Facts says that BNP knowingly utilized cover payments and complicated payment structures, instructed co-conspirator financial institutions to not use the names of the sanctioned entities in US dollar payment messages, and removed sanctions-related information from transactions.
As a result, BNP agreed to plead guilty to conspiring to violate the International Emergency Economic Powers Act (IEEPA) and Trading with the Enemy Act (TWEA), the primary US sanctions laws. BNP also settled related New York State criminal actions based upon falsification of business records, and regulatory actions by the New York State Department of Financial Services and the Federal Reserve. Settlement of the state and regulatory matters called for payment by BNP of $4.994, 800 billion, which was credited against the $8.833, 600 billion forfeiture. In addition, the US Treasury Department’s Office of Foreign Assets Control fined BNP US$963 million, which is to be satisfied by BNP’s payments to the DOJ.
In addition to monetary penalties, BNP agreed to a cease and desist order with the Federal Reserve, pursuant to which BNP will implement a program to ensure its compliance with US sanctions. BNP has also agreed to discharge 13 bank employees, and to suspend certain US dollar clearing operations for one year beginning January 1, 2015. BNP further agreed to a prohibition on its clearing US dollar transactions for certain unaffiliated banks for two years.
The BNP enforcement action is yet another reminder that consequences of breach of US sanctions can be extremely severe. All entities who deal with jurisdictions or entities subject to US sanctions need to be alert to the potential consequences, especially those that may flow from US dollar transactions.