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France's very bad bank (1)

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Stephen A. Bornstein

BNP Paribas, France's largest bank, illegally engaged in over $30 billion of US dollar transactions between 2002-2012 on behalf of entities in Cuba, Iran, and Sudan in violation of US sanctions against those countries. When caught, BNP Paribas was fined $8.97 billion by US regulators, the largest fine ever for a foreign bank, and pleaded guilty to criminal charges, a first for a foreign bank. The penalties outraged the French government despite BNP Paribas' serious and long-running violations.

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Frances Very Bad Bank By Stephen Bornstein July 15, 2014 Did BNP Paribas get off easy? As the mostliquidcurrencyon the planet,the Americandollaris byfarthe denominationof choice in international trade.1 Those whocantaccess itare effectivelybarredfrom global commerce. The onlypractical wayto gainaccess to USD is througha US bankor the US branch of a foreignbank. Doingso, however,subjects whoevertransfersorreceives USDto US law,evenif that party is foreign. Amongthe US lawsapplicable toUSDtransactions are the financial sanctionsthe UShasimposedon countries like Cuba(in1960), Iran (in1995) and Sudan(in1997) in an effortto deterhumanrights abusesandthreatsto global security. These sanctionsprohibitUSbanksandthe US branchesof foreign banksfrom doingbusinesswithcounterpartiesinthe blacklistedcountries. In a class by itself Between2002 and 2012, BNP Paribas,Franceslargestbank, engagedinmore than $30 billion2 of USD transactionsonbehalf of entitiesinCuba,IranandSudan. The illegal transactionswere centeredin BNPsoil & gas tradingunitinGeneva. That unithad foryears been extendingcreditand transferring USD paymentsforbuyersandsellers of petroleumproducts inall three of the sanctionedcountries. Whenthose countriesbecame subjecttoUS sanctions, BNP apparently didnotat firstbelieve the US sanctions appliedtoitand,when advised otherwisebycounsel, nevertheless carriedon itsUSD dealings withthe sanctionedentities,treatingpotentialUS legal penalties asjustabusinessrisk. BNPknew full well thatitwasviolatingUSsanctions anddisguisedevery USDtransaction witha sanctionedentity bystrippingall referencesto thatentityinthe transferordersplacedwitheitherits ownNewYork branch or an unaffiliated(andunwitting) New Yorkbank. Innumerous instances, BNP alsointerposedindependentforeign (satellite) banksbetweenthe sanctionedcounterpartiesand BNPsbranch inGenevasoas to conceal the identitiesof the real sourcesorbeneficiariesof the USD transfers. BNPcontinuedtocircumventUS sanctionsevenafter ABN Amrowas penalized in2005 forengagingin similardeceptions. Ataboutthe same time,BNPwaswarnedby US authoritiesthatthe bank wasunder investigation foritscompliance policiesinthisarea. Seniormanagement atBNPignoredthese red 1 More than 61% of the worlds currency reserves are denominated in USD. About 25% are denominated in Euro. 2 Figures as high as $190 billion havebeen reported, but the US claims (http://www.justice.gov/opa/documents/paribas/statement-of-facts.pdf) againstthe bank were based on $8.8 billion of proven criminal transactions.
flagsas well as multipleinternal warningstostopdealingwith countriessubjecttoUS sanctions. To boot,the bank wasalso lessthanfullycooperative duringthe USinvestigation and, bydraggingitsfeet, prevented USlawenforcementfrombringingcriminal chargesagainst individual BNP employeesand cooperatingsatellite banksdue to afive-yearstatute of limitations. An international incident For the enormityandpersistenceof itsviolations,BNPwasfinedawhopping$8.97 billion3 byUS regulatorsand,more painfully,forcedtopleadguiltytocriminal charges. Itisthe firstforeignbankever to have beencriminallyconvicted forsanctionsviolations. UnderitssettlementwithUSauthorities,the bankalso prematurelyretired64year-oldCOOGeorgesChodronde Courcel forcondoningthe violations,demotedanumberof otherparticipatingemployeesandagreedtosuspenditsso-called dollar-clearingactivitiesinoil &gasfor one year,startingin2015.4 As soonas he got windof the penaltiesfacingBNP,FrenchpresidentFran巽oisHollandepersonallycalled Barack Obama and toldhimthat singlingoutBNPfora criminal convictionandanexorbitantfine5 was an offense againstFrance since the bankdidnotviolate anyFrenchlaws.6 Obama ignoredHollandes plea7 and,surprisinglytomany,none of the penaltiesimposeduponBNP turnedoutto really threatenitsbusinessorprospects. Shortlyafteritssettlementwas reached, CEO Jean-LaurentBonnaf辿 announcedpubliclythat BNPsclientswouldstickbythe bankand the penalties wouldhave nomajor impacton the business. The bankthendeclared itsregularannual dividendand itsstock wasup 3.6% onthe news. Giventhe size anddurationof its illegal transactions,itsfalsificationof recordsand,mostdamning,the intransigence of itsseniormanagement, canyouthinkof any financial institutionmore deservingof beingputout of businessthanBNPParibas? Were itnot for Hollandes intervention,BNPsbanking license inthe USmay well have been revoked andsome BNPhigher-upschargedwithcrimes. Inthe currentenvironment (http://aroundwallstreet.com/2014/01/what-makes-a-securities-case-go- criminal/),if BNPwere anAmericanbank, itsafairguessthat buildingsecuritywould soonbe turning out itslightsforthe last time. 3 BNPs net income in 2013 was $6.5 billion. 4 Dollar-clearingis thebusiness of effecting payments in USD and BNPs dollar-clearingactivities in oil & gas accountfor less than 1% of BNPs group revenues. 5 The highest earlier finefor sanctions violationsby any bank was $1.9 billion levied againstHSBC in 2012. In 2005, ABN Amro was the firstforeign bank to be fined for sanctions violations and theamount of the fine was $80 million. 6 Russian presidentVladimir Putin even chimed in on Frances behalf,claimingthatthe BNP finewas a n attempt by the US to blackmail Franceinto renegingon a pending saleof two warships to Russia. 7 Obama reportedly replied that he doesnt justpick up the phone and call theJustice Department. Perhaps that happens elsewhere.
TAGS: FRANCE, BANK,BNPPARIBAS,DOLLAR,FINANCIALSANCTIONS,CUBA,IRAN,SUDAN,USD,OIL & GAS,SATELLITE BANKS,GENEVA,ABN AMRO,GEORGES CHODRON DE COURCEL, DOLLAR-CLEARING, FRANOISHOLLANDE, BARACKOBAMA, JEAN-LAURENTBONNAF,GUILTYPLEA, CRIMINAL CONVICTION,BANKINGLICENSE,HSBC, VLADIMIRPUTIN,CURRENCY RESERVES

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France's very bad bank (1)

  • 1. Frances Very Bad Bank By Stephen Bornstein July 15, 2014 Did BNP Paribas get off easy? As the mostliquidcurrencyon the planet,the Americandollaris byfarthe denominationof choice in international trade.1 Those whocantaccess itare effectivelybarredfrom global commerce. The onlypractical wayto gainaccess to USD is througha US bankor the US branch of a foreignbank. Doingso, however,subjects whoevertransfersorreceives USDto US law,evenif that party is foreign. Amongthe US lawsapplicable toUSDtransactions are the financial sanctionsthe UShasimposedon countries like Cuba(in1960), Iran (in1995) and Sudan(in1997) in an effortto deterhumanrights abusesandthreatsto global security. These sanctionsprohibitUSbanksandthe US branchesof foreign banksfrom doingbusinesswithcounterpartiesinthe blacklistedcountries. In a class by itself Between2002 and 2012, BNP Paribas,Franceslargestbank, engagedinmore than $30 billion2 of USD transactionsonbehalf of entitiesinCuba,IranandSudan. The illegal transactionswere centeredin BNPsoil & gas tradingunitinGeneva. That unithad foryears been extendingcreditand transferring USD paymentsforbuyersandsellers of petroleumproducts inall three of the sanctionedcountries. Whenthose countriesbecame subjecttoUS sanctions, BNP apparently didnotat firstbelieve the US sanctions appliedtoitand,when advised otherwisebycounsel, nevertheless carriedon itsUSD dealings withthe sanctionedentities,treatingpotentialUS legal penalties asjustabusinessrisk. BNPknew full well thatitwasviolatingUSsanctions anddisguisedevery USDtransaction witha sanctionedentity bystrippingall referencesto thatentityinthe transferordersplacedwitheitherits ownNewYork branch or an unaffiliated(andunwitting) New Yorkbank. Innumerous instances, BNP alsointerposedindependentforeign (satellite) banksbetweenthe sanctionedcounterpartiesand BNPsbranch inGenevasoas to conceal the identitiesof the real sourcesorbeneficiariesof the USD transfers. BNPcontinuedtocircumventUS sanctionsevenafter ABN Amrowas penalized in2005 forengagingin similardeceptions. Ataboutthe same time,BNPwaswarnedby US authoritiesthatthe bank wasunder investigation foritscompliance policiesinthisarea. Seniormanagement atBNPignoredthese red 1 More than 61% of the worlds currency reserves are denominated in USD. About 25% are denominated in Euro. 2 Figures as high as $190 billion havebeen reported, but the US claims (http://www.justice.gov/opa/documents/paribas/statement-of-facts.pdf) againstthe bank were based on $8.8 billion of proven criminal transactions.
  • 2. flagsas well as multipleinternal warningstostopdealingwith countriessubjecttoUS sanctions. To boot,the bank wasalso lessthanfullycooperative duringthe USinvestigation and, bydraggingitsfeet, prevented USlawenforcementfrombringingcriminal chargesagainst individual BNP employeesand cooperatingsatellite banksdue to afive-yearstatute of limitations. An international incident For the enormityandpersistenceof itsviolations,BNPwasfinedawhopping$8.97 billion3 byUS regulatorsand,more painfully,forcedtopleadguiltytocriminal charges. Itisthe firstforeignbankever to have beencriminallyconvicted forsanctionsviolations. UnderitssettlementwithUSauthorities,the bankalso prematurelyretired64year-oldCOOGeorgesChodronde Courcel forcondoningthe violations,demotedanumberof otherparticipatingemployeesandagreedtosuspenditsso-called dollar-clearingactivitiesinoil &gasfor one year,startingin2015.4 As soonas he got windof the penaltiesfacingBNP,FrenchpresidentFran巽oisHollandepersonallycalled Barack Obama and toldhimthat singlingoutBNPfora criminal convictionandanexorbitantfine5 was an offense againstFrance since the bankdidnotviolate anyFrenchlaws.6 Obama ignoredHollandes plea7 and,surprisinglytomany,none of the penaltiesimposeduponBNP turnedoutto really threatenitsbusinessorprospects. Shortlyafteritssettlementwas reached, CEO Jean-LaurentBonnaf辿 announcedpubliclythat BNPsclientswouldstickbythe bankand the penalties wouldhave nomajor impacton the business. The bankthendeclared itsregularannual dividendand itsstock wasup 3.6% onthe news. Giventhe size anddurationof its illegal transactions,itsfalsificationof recordsand,mostdamning,the intransigence of itsseniormanagement, canyouthinkof any financial institutionmore deservingof beingputout of businessthanBNPParibas? Were itnot for Hollandes intervention,BNPsbanking license inthe USmay well have been revoked andsome BNPhigher-upschargedwithcrimes. Inthe currentenvironment (http://aroundwallstreet.com/2014/01/what-makes-a-securities-case-go- criminal/),if BNPwere anAmericanbank, itsafairguessthat buildingsecuritywould soonbe turning out itslightsforthe last time. 3 BNPs net income in 2013 was $6.5 billion. 4 Dollar-clearingis thebusiness of effecting payments in USD and BNPs dollar-clearingactivities in oil & gas accountfor less than 1% of BNPs group revenues. 5 The highest earlier finefor sanctions violationsby any bank was $1.9 billion levied againstHSBC in 2012. In 2005, ABN Amro was the firstforeign bank to be fined for sanctions violations and theamount of the fine was $80 million. 6 Russian presidentVladimir Putin even chimed in on Frances behalf,claimingthatthe BNP finewas a n attempt by the US to blackmail Franceinto renegingon a pending saleof two warships to Russia. 7 Obama reportedly replied that he doesnt justpick up the phone and call theJustice Department. Perhaps that happens elsewhere.
  • 3. TAGS: FRANCE, BANK,BNPPARIBAS,DOLLAR,FINANCIALSANCTIONS,CUBA,IRAN,SUDAN,USD,OIL & GAS,SATELLITE BANKS,GENEVA,ABN AMRO,GEORGES CHODRON DE COURCEL, DOLLAR-CLEARING, FRANOISHOLLANDE, BARACKOBAMA, JEAN-LAURENTBONNAF,GUILTYPLEA, CRIMINAL CONVICTION,BANKINGLICENSE,HSBC, VLADIMIRPUTIN,CURRENCY RESERVES