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BNP Paribas guilty of banned moves

Bloomberg News
| Tuesday, July 1, 2014 12:01 a.m

BNP Paribas SA pleaded guilty to American sanction violations and agreed to pay a record $8.97 billion in a case that reached the highest echelons of French and American diplomacy.

BNP, France’s largest bank, admitted that it processed almost $9 billion in banned transactions from 2004 to 2012 involving Sudan, Iran and Cuba, the Justice Department said. The bank will be barred from dollar-clearing operations for one year for its oil and gas commodity finance business.

As part of the agreement, New York’s top banking regulator required 13 executives to leave the bank, including Georges Chodron de Courcel, co-chief operating officer; Vivien Levy-Garboua, former head of compliance; Dominique Remy, former head of structured finance for the corporate investment bank; and Stephen Strombelline, head of ethics and compliance for North America, the regulator said in a statement.

“BNP Paribas went to elaborate lengths to conceal prohibited transactions, cover its tracks and deceive U.S. authorities,” U.S. Attorney General Eric Holder said. “If sanctions are to have teeth, violations must be punished.”

Fallout from the probe, and negotiations over its settlement with state and federal prosecutors, has reached the highest levels of the French and American governments. Overtures this year by numerous French officials, including President Francois Hollande, weren’t enough to persuade American officials to take a more lenient approach with the country’s biggest bank. 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 American dollars through a third party. The Bank of France said BNP can withstand the fine and dollar clearing ban.

BNP becomes the second major European bank in the past two months to plead guilty in the United States.

In May, Credit Suisse Group AG agreed to pay $2.6 billion, the largest penalty in an offshore tax case, after using secret Swiss accounts to help Americans hide money from the Internal Revenue Service. Its main banking unit pleaded guilty.

The BNP investigation centered on its commodity-trade finance business in Paris and Geneva.

About 30 executives who worked there have resigned, gone on leave, been fired or relocated since 2012, people familiar with the matter have said.

Some unauthorized dollar payments were made on behalf of oil companies to Sudanese or Iranian entities, one former employee has said. Prosecutors also reviewed metals and agriculture commodity deals, as well as non-commodity transactions, two people with knowledge of the matter have said.

While most of the transactions ended in 2008, some continued until at least 2011, two former employees have said.

Some bankers believed the deals were allowed because they weren’t given guidance or rules from compliance and legal departments against doing them, they said. Management didn’t order such transactions to stop until 2011, one said.

While BNP’s case is resolved, at least two other French banks are still under investigation. Societe Generale SA and Credit Agricole SA, France’s No. 2 and No. 3 banks by market value, respectively, have said in company filings this year that they are conducting internal reviews and cooperating with authorities regarding dollar transactions involving embargoed countries.

Categories: Wire stories
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