French bank BNP Paribas has pleaded guilty to two criminal charges and agreed to pay almost $9 billion to resolve allegations that in many financial dealings it violated US sanctions against Sudan, Cuba and Iran.
In an unprecedented move, regulators also banned BNP for a year from conducting certain US dollar transactions, a critical part of the bank’s international business.
The authorities said the severe penalties were warranted because of BNP’s persistent and deliberate violations and desire to put profits first, even after US officials warned the bank of its obligation to police for illicit money flows.
The bank essentially functioned as the “central bank for the government of Sudan,” concealed its tracks and failed to cooperate when first contacted by law enforcement, Deputy Attorney General James Cole said.
The bank’s general counsel, Georges Dirani, briefly appeared in New York state court to plead guilty to one count of falsifying business records and one count of conspiracy.
US authorities also found BNP Paribas had evaded sanctions against entities in Iran and Cuba, in part by stripping information from wire transfers so they could pass through the US system without raising red flags.
With its Sudanese clients, the bank admitted it set up elaborate payment structures that routed transactions through satellite banks to disguise their origin.
“BNP banked on never being held to account for its criminal support of countries and entities engaged in acts of terrorism and other atrocities, but that is exactly what we did today,” said Manhattan US Attorney Preet Bharara.
US authorities said BNP took steps to evade US sanctions going back to at least 2004 and through to 2012.
The penalties against France’s largest bank dwarf any previously handed out for sanctions avoidance and are far bigger than those against Credit Suisse in May, which became the largest bank in decades to plead guilty to a US criminal charge, for helping Americans evade taxes.
No individuals were charged on Monday, but US authorities said they have not wrapped up their probes.
BNP said it would take an exceptional charge of €5.8 billion ($7.9 billion) in the second quarter of this year.
“We deeply regret the past misconduct that led to this settlement,” BNP’s chief executive officer Jean-Laurent Bonnafe told analysts and investors on a conference call yesterday. “The failures that have come to light in the course of this investigation run contrary to the principles on which BNP Paribas has always sought to operate.”
He said the bank would implement a significant strengthening of its internal controls and processes.
The bank would need to suspend its so-called dollar-clearing operations through its New York branch and other US affiliates during all of 2015 at the business lines where the misconduct took place, the US authorities said.
The temporary ban could trigger a client exodus, and it is not clear how BNP may blunt its impact.
It said it would clear the affected dollar-clearing operations through another bank, which it did not name.
In addition, the bank will need to prohibit all US dollar clearing as a correspondent bank for unaffiliated third-party banks in New York and London for two years. Of the total payment, $2.24 billion would go to Lawsky’s Department of Financial Services as a civil penalty, and 13 individuals – including Group Chief Operating Officer Georges Chodron de Courcel – would leave the bank.
In total, the bank disciplined 45 employees in connection with the investigation.
The Department of Justice said BNP’s illicit Iranian transactions were conducted on behalf of its clients, including a petroleum company based in Dubai that was effectively a front for an Iranian petroleum company.
Internal bank memos showed that BNP officials, while aware of the humanitarian crisis in Sudan and the ties of the government with al Qaeda founder Osama bin Laden, chose to continue to do business with Sudan because it was commercially attractive.
France’s bank supervisor ACPR said that the bank could cope with the sanctions without risking its financial health.