France's largest bank, BNP Paribas, has agreed to pay nearly $9 billion to resolve criminal allegations that it processed transactions for clients in Sudan and other blacklisted countries in violation of U.S. trade sanctions, the Justice Department announced Monday. The bank pleaded guilty to state charges in New York and plans another guilty plea in federal court next month.
After months of negotiations, BNP admitted to violating U.S. trade sanctions by processing billions of dollars in illegal transactions on behalf of clients in Sudan, Cuba and Iran. The United States had imposed sanctions on the countries to block their participation in the global financial system.
The transactions, which prosecutors say were processed through its New York branch office from at least 2004 through 2012, were handled at the same time as human rights abuses — including the genocide in Sudan — were occurring in those nations.
"Sanctions are a key tool in protecting U.S. national security interests, but they only work if they are strictly enforced," Attorney General Eric Holder said. "If sanctions are to have teeth, violations must be strictly punished."
The goal of such sanctions is to cut off an enemy nation's access to banks and other sources of capital, limiting its economic growth and ability to buy weapons, food and other items available through global trade. The restrictions on dealings with sanctioned countries generally apply to U.S. banks and foreign banks with U.S. operations.
The roughly $8.9 billion deal is the largest sanctions case brought by the Justice Department and the largest penalty in any criminal case involving a bank. Prosecutors say the penalty was necessary not only because of the sheer volume of the illicit transactions but also because of the bank's efforts to hide them and executives' lack of co-operation with the Justice Department.
As the BNP deal inched closer, French officials in recent weeks had expressed deep concern about the punishment. They lobbied for White House intervention and warned that a large penalty could affect the entire European economy and hold up a trans-Atlantic free trade agreement.
The French economy minister last week asked the Justice Department to be "fair and proportionate" in deciding on the potential penalty. President Francois Hollande wrote to the Obama administration in April asking for a "reasonable" solution, though President Barack Obama deflected calls to get involved in the dispute.
Paris-based BNP on Monday entered a guilty plea in state court in New York City to falsifying business records. The bank is expected to plead guilty in federal court on July 9 for conspiring to violate the International Emergency Economic Powers Act and the Trading With the Enemy Act.
It has also agreed to fire multiple senior executives and will lose for one year its ability to process certain transactions in U.S. dollars. No individual BNP executives were charged.
"We deeply regret the past misconduct that led to this settlement," Jean-Laurent Bonnafe, CEO of BNP, said in a statement. "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."
The bank said in addition to provisions it has already taken, it will book a charge of 5.8 billion euros ($7.9 billion) in the second quarter.
"It is not hyperbole to say that the most important values in the international community — respect for human rights, peaceful coexistence, and a world free of terrorism — depend in large part on the effectiveness of these sanctions," said Manhattan District Attorney Cyrus Vance Jr., who said the investigation started with a tip to his office.
U.S. authorities in recent years have pursued other multiple big foreign banks for sanctions violations, though those matters have been resolved for smaller dollar figures.
HSBC, Europe's largest bank, agreed to a $1.9 billion settlement with U.S. and New York authorities in connection with the transfer of billions of dollars on behalf of Iran, Cuba, Libya, Sudan and Myanmar.
Standard Chartered paid $340 million in a settlement with New York state regulators, who accused the bank of scheming with the Iranian government to launder billions of dollars. The bank also paid $327 million to settle U.S. and New York charges related to currency transactions for Iranian, Sudanese, Libyan and Burmese entities that were said to be concealed from regulators.
Meanwhile, in two separate similar investigations in France, authorities are also looking at Credit Agricole and Societe Generale, people involved in the probe have said. Together with BNP Paribas, they constitute France's top three banks.
The BNP announcement comes weeks after Credit Suisse struck a $2.6 billion plea deal with the Justice Department for helping wealthy Americans avoid taxes. Shortly before that case was brought, Holder — whose Justice Department has been accused of not being aggressive enough in confronting bank misconduct — issued a video message declaring that no bank was too large to prosecute.