French bank BNP Paribas has pleaded guilty to two criminal charges and agreed to pay almost $9 billion to resolve accusations it violated US sanctions against Sudan, Cuba and Iran, a severe punishment aimed at sending a clear message to other financial institutions around the world.
The guilty plea is the direct consequence of a broader US Justice Department shift in strategy that is expected to try to snare more major banks for possible money laundering or sanctions violations.
In an unprecedented move, regulators banned BNP for a year from conducting certain US dollar transactions, a critical part of the bank's global business, in addition to the fine which was a record for violating American sanctions.
"Through a series of egregious schemes to evade detection and with the knowledge of multiple senior executives, BNP employees concealed more than $190 billion in transactions between 2002 and 2012 for clients subject to US sanctions including Sudan, Iran and Cuba," the New York State regulator said.
US authorities said the severe penalties reflected BNP's drive to put profits first, even after US officials warned the bank of its obligation to crack down on illegal activity.
Shares in BNP closed 3.6 percent higher on Tuesday.
The bank essentially functioned as the "central bank for the government of Sudan," concealed its tracks and failed to cooperate when first contacted by law enforcement, US authorities said.
They also found BNP had evaded sanctions against entities in Iran and Cuba, in part by stripping information from wire transfers so they could pass through the US system without raising red flags.
With its Sudanese clients, the bank admitted it set up elaborate payment structures that routed transactions through satellite banks to disguise their origin.
"BNPP banked on never being held to account for its criminal support of countries and entities engaged in acts of terrorism and other atrocities, but that is exactly what we did today," said Manhattan US Attorney Preet Bharara, whose office helped to prosecute the case.
"We deeply regret the past misconduct that led to this settlement," BNP's Chief Executive Officer Jean-Laurent Bonnafe told analysts and investors on a conference call on Tuesday. He said the bank would implement a significant strengthening of its internal controls and processes.
French banks Credit Agricole and SocGen have disclosed that they too are reviewing whether they violated US sanctions. SocGen said in its latest annual report it was in discussions with the Treasury Department's Office of Foreign Assets Control over potential sanctions violations. The two banks could not be immediately reached for comment.
The settlement marks a stinging rebuke for BNP, the grand dame of French banking and one of the world's five biggest banks by assets. Until now it had managed to avoid the sort of scandals that have damaged many rivals.
From BNP's historic Parisian headquarters, where Napoleon married Josephine in 1796, the bank's management has always prided itself on the sort of tight risk controls that helped it successfully navigate the financial and euro zone debt crises.
France's bank supervisor said that BNP could cope with the sanctions without risking its financial health, and Finance Minister Michel Sapin said the bank "will still be able to finance economic activity" in France. But the stock is down around 16 percent since mid-February because of the affair.
Worries about the future of France's biggest listed bank and the knock-on effect on the fragile French economy prompted President Francois Hollande to express concern to Barack Obama and a French threat to derail US-EU trade talks.
Leslie Caldwell, who leads the Justice Department's criminal division, said in an interview that a unit within the department has its sights set on a range of firms potentially involved in illicit money flows.
The penalties imposed on BNP Paribas dwarf any previously handed out for sanctions avoidance and are far bigger than those against Credit Suisse in May, which became the largest bank in decades to plead guilty to a US criminal charge, for helping Americans to evade taxes.
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