French bank BNP Paribas SA, one of the largest banks in the world, faces possible prosecution by the United States government after investigations revealed the bank moved funds for clients in Sudan, Iran and Cuba, in violation of US sanctions.
In recent negotiations with BNP bank, US prosecutors have reportedly demanded a fine as much as $10 billion, an amount that is roughly three times South Sudan’s entire annual government budget.
Business newspapers have reported that the ongoing US investigation focuses on whether the French bank violated US sanctions and anti-money laundering rules between 2002 and 2009 by disguising transactions with the mentioned countries.
The US Federal Bureau of Investigation helped lead the probe of the bank. Prosecutors from the Justice Department and regulators in the Treasury Department’s Office of Foreign Assets Control and the Federal Reserve, the US central bank, are now also involved.
Bank officials and prosecutors started meeting in early May to discuss settling the case without a criminal trial. The two sides are still negotiating a potential settlement and the size of the fine that the company would have to pay.
Prosecutors are seeking to impose a ‘severe’ penalty on BNP because of ‘egregious’ violations of the sanctions laws and failure to cooperate fully with the investigation, Bloomberg news reported.
The news agency quoted Samuel Buell, a former US federal prosecutor who is now a professor at Duke University School of Law, as saying that the Justice Department is trying to make an example of the bank.
Buell said the Justice Department was trying to ‘send a message’ to the financial industry, in order to deter banks from dealing with clients from Sudan and other sanctioned countries.
French government protests
French Foreign Minister Laurent Fabius said a fine of the size suggested would be “an extremely serious problem.” Speaking on the France 2 television channel, he added it would be an example of an “unfair and unilateral decision.”
“The fine has to be proportionate and reasonable. These figures are not reasonable,” said Fabius.
French President Francois Hollande said he plans to raise his concerns about the possible fine during an upcoming meeting with US President Barack Obama,
French officials have said the two presidents will meet over dinner at a restaurant in central Paris on Thursday, Reuters reported.
Impact
A fine as high as $10bn – a number initially reported by the Wall Street Journal newspaper last Friday – would represent one of the largest penalties ever sought by the US Department of Justice against a bank in a criminal case.
The figure is more than 20 percent more than BNP’s 2013 pretax income. This means the bank would suffer significantly if it had to pay the fine.
The bank’s shares on stock markets have declined in price by as much as 6.1% since news of the investigation broke.
Financial Times reports that US prosecutors initially were pushing for a $3.5bn fine, then $5bn, before finally threatening to prosecute the bank for $10bn.
However, in recent cases of this kind the US government has preferred to avoid criminal prosecution of large companies and instead settle matters out of court.
This preference relates partly to economic concerns; previous court trials have led to the collapse of prosecuted companies. For example, the 2002 prosecution of accounting company Arthur Anderson LLP eventually led to the company’s collapse, leaving about 85,000 people unemployed.
Bloomberg news agency, citing a source close to the talks, reports that a final deal between BNP and the US government “is probably weeks away.”