BNP Near Settlement With U.S. for Up to $9 Billion
Investigators Say Evidence Indicates French Bank Hid $30 Billion of Transactions in Violation
BNP Paribas SA and U.S. prosecutors have agreed to broad terms of a deal in which the bank would pay $8 billion to $9 billion and accept other punishment based on what investigators say is evidence the bank intentionally hid $30 billion of financial transactions that violated U.S. sanctions, according to people close to the probe.
The two sides in recent days reached a general outline of a deal that also would include a guilty plea to a criminal charge of conspiring to violate the International Emergency Economic Powers Act and a temporary ban—likely lasting a period of months—on the company's ability to transact in U.S. dollars, according to several people familiar with the discussions.
As part of the deal, officials plan to announce the departures of more than 30 bank employees, acceding to demands by the New York Department of Financial Services that individuals also be punished, according to people close to the talks. The majority of those people have already left the bank, they said.
Negotiations between the French bank and U.S. authorities have entered their final stage, according to people close to the discussions. On Friday, the head of the Justice Department's criminal division, Leslie Caldwell, spoke with bank officials to discuss the precise timing of a guilty plea and announcement, according to one person familiar with the negotiations.
Investigators have gathered information detailing how BNP, over a period of more than five years, used regional banks overseas in order to route funds linked to companies and government agencies in Sudan—at a time when the nation was engaged in what the U.S. and others call genocide, these people said.
Overall, U.S. authorities examined more than $100 billion of transactions that raised suspicions before focusing on about $30 billion they eventually concluded were willfully hidden to avoid detection by U.S. sanctions enforcers, according to people close to the investigation.
A majority of those transactions involved Sudan, though BNP also facilitated such transfers for Iran and other sanctioned countries. Most of the Sudanese transactions were related to oil deals, these people said.
The revelations about the volume of allegedly illicit transactions processed by BNP come amid rising trans-Atlantic tensions over the fate of France's largest listed bank and a series of sharp Franco-U.S. exchanges over whether BNP is being treated fairly.
Earlier in the negotiations, France's President François Hollande blasted what he called "unfair" and "disproportionate" demands by the U.S., including the ban on transacting in U.S. dollars, which he said threatened not just the bank but economic stability of the euro zone. President Barack Obama, who was headed to France to attend D-Day commemorations and dine with Mr. Hollande, said during a news conference earlier this month that he doesn't "meddle" in U.S. prosecutions.
A guilty plea is likely to come in early July, according to people familiar with the discussions, though they cautioned that precise terms haven't yet been set and that the timing could be delayed by the complexity of the settlement and the sheer number of government agencies involved in the talks.
It also is possible, though increasingly unlikely, that the two sides can't finalize a deal. In that case, the U.S. would have to decide whether to file criminal charges against the bank.
The U.S. has been seeking more than $10 billion in penalties. Investigators have privately expressed the view that BNP is getting a discount on the total penalty because under U.S. law, the bank could be forced to pay double the amount of the illegal transactions it processed—about $60 billion based on the $30 billion in allegedly criminal transactions. Officials readily concede that such a sum would be unreasonable and uncollectable.
Seasoned sanctions investigators say BNP went to extensive lengths to disguise transactions from the U.S. Treasury Department's screening system. The bank allegedly used a network of banks in East Africa, the Middle East and Europe to make it appear as if dollar-based transfers were unconnected to Sudan.
While investigators believe the bulk of those transactions were for Sudan's oil business, they also tried to determine if some of those transactions may have facilitated weapons deals, people familiar with the probe said. They didn't find evidence proving those suspicions, and the final settlement documents may not make any reference to the issue, the people said.
About a decade ago, BNP became the preferred bank for Sudanese companies and government officials seeking to do business in dollars without running afoul of U.S. sanctions, according to investigators. In 2007, the bank announced it would no longer do business in Sudan. In the case of Iranian transactions, the bank had to admit as recently as last year that it had found additional transactions for sanctioned entities.
The U.S. has been investigating European banks regarding sanctions violations for more than five years and still has several cases outstanding. A penalty close to $9 billion for BNP would be the largest by far for violating U.S. sanctions.
U.S. officials contend that BNP's evasion of sanctions was far more extensive than other banks previously punished for similar conduct. Sanctions cases typically involve a bank altering records to avoid raising the suspicion of the U.S. Treasury Department's Office of Foreign Assets Control, or OFAC. Some banks and customers try to get around the "OFAC filter'' to avoid running afoul of sanctions or to prevent a transaction from being delayed while authorities give it extra scrutiny, according to people close to the investigations.
In past cases, banks have removed—or "stripped"—such red-flag information such as codes that would identify the sender or recipient of the funds as being in a sanctioned country. This process could mean leaving certain fields blank in financial forms, filling such fields with a single period or an internal code to indicate the transaction involved a bank branch somewhere else, such as London or Paris.
The BNP probe has found a different means of disguising suspicious transactions, people close to the investigation say. BNP used regional banks with their own clearing codes to route illegal transactions with Sudan, making them more difficult to detect, according to multiple people involved in the investigation.
Over the course of the past year, officials involved in the probe gradually concluded BNP's misconduct dwarfed that of previous cases, and determined to raise the amount of their penalty.
"If there is a violation of a rule, it is normal to have a penalty, but the penalty must be proportional and reasonable," French Foreign Minister Laurent Fabius said earlier this month. "These figures are not reasonable."