CryptocurrencyInvestingBanksReal Estate

BNP Paribas agrees to pay nearly $9 billion to settle sanctions violations accusations

June 30, 2014, 8:06 AM UTC
Fabrice Dimier/Bloomberg—Getty

BNP Paribas (BNPQY) has agreed to pay nearly $9 billion to settle accusations by U.S. prosecutors that it helped Iran, Sudan and Cuba transfer money internationally in violation of trade sanctions, the Justice Department said on Monday.

The French bank pleaded guilty to processing billions of dollars for the countries in a landmark criminal case that is intended to send a message to other financial institutions. The settlement, the latest in a series of multi-billion fines handed down for bad behavior by banks, brings a five-year criminal probe to an end with the largest ever fine for sanction violations, dwarfing the $1.9 billion paid in 2011 by HSBC Holdings PLC (HBC).

However, it’s still well short of the maximum fine that could have been imposed, given that U.S. law allowed the authorities to levy a multiple of the $30 billion in illicit transactions that were at the heart of the case.

The Financial Times reported that BNP’s board approved the settlement on Sunday, noting that it had secured one important concession from the U.S. authorities. Although the bank’s license to clear transactions in U.S. dollars will still be suspended, that suspension will be delayed for six months.

As such, the bank’s clients will have time to make alternative arrangements for using dollar transactions. The suspension is particularly painful for BNP Paribas, which is one of the world’s biggest players in international trade finance, where the dollar is the dominant unit of account. The payments targeted in the case were largely made by the bank’s trade finance arm.

The penalties include $8.8 billion in forfeited money plus another $140 million in fines. Additionally, the bank pleaded guilty in New York State Supreme Court to falsifying business records and conspiracy.

BNP Paribas’ shares in Paris opened up slightly on the news, having fallen around 20% over the last two months in reaction to reports that the fine could top $10 billion.

The settlement throws an uncomfortable spotlight on the French banking authorities, who had previously defended BNP Paribas. French central bank governor Christian Noyer said in May that: “We have verified that all the suspect transactions conformed to all laws and regulations both at the French and the European level.”

French President Francois Hollande had personally requested his U.S. counterpart Barack Obama to intervene to prevent a settlement that his foreign minister described as “unjust” and “unreasonable.” Obama had refused to get involved in an independent judicial process.

In addition to the fine and the suspension, the bank will also agree to dismiss over a dozen employees, the FT said. It wasn’t clear how many of them have already left the bank. Earlier in June, BNP Paribas said its chief operating officer Georges Chodron de Courcel, who had run the Swiss  operations through which many of the illicit payments flowed, would step down six months early.

(This story was updated with new information from a Justice Department’s announcement on Monday)