FBI
French bank fined nearly $9 billion for violating U.S. sanctions in its financial transactions

BNP Paribas Agrees to Plead Guilty and to Pay $8.9 Billion for Illegally Processing Financial Transactions for Countries Subject to U.S. Economic Sanctions

U.S. Department of Justice June 30, 2014

WASHINGTON—According to court documents submitted today, BNP Paribas S.A. (BNPP), a global financial institution headquartered in Paris, agreed to enter a guilty plea to conspiring to violate the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA) by processing billions of dollars of transactions through the U.S. financial system on behalf of Sudanese, Iranian, and Cuban entities subject to U.S. economic sanctions. The agreement by the French bank to plead guilty is the first time a global bank has agreed to plead guilty to large-scale, systematic violations of U.S. economic sanctions.

The announcement was made by Attorney General Eric H. Holder, Deputy Attorney General James M. Cole, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Preet Bharara for the Southern District of New York, FBI Director James B. Comey, Chief Richard Weber of the Internal Revenue Service Criminal Investigation (IRS-CI) and District Attorney Cyrus R. Vance Jr. of New York County.

“BNP Paribas went to elaborate lengths to conceal prohibited transactions, cover its tracks, and deceive U.S. authorities. These actions represent a serious breach of U.S. law,” Attorney General Holder said. “Sanctions are a key tool in protecting U.S. national security interests, but they only work if they are strictly enforced. If sanctions are to have teeth, violations must be punished. Banks thinking about conducting business in violation of U.S. sanctions should think twice because the Justice Department will not look the other way.”

“BNP ignored U.S. sanctions laws and concealed its tracks. And when contacted by law enforcement it chose not to fully cooperate,” Deputy Attorney General Cole said. “This failure to cooperate had a real effect — it significantly impacted the government’s ability to bring charges against responsible individuals, sanctioned entities and satellite banks. This failure together with BNP’s prolonged misconduct mandated the criminal plea and the nearly $9 billion penalty that we are announcing today.”

“By providing dollar clearing services to individuals and entities associated with Sudan, Iran, and Cuba—in clear violation of U.S. law—BNPP helped them gain illegal access to the U.S. financial system,” said Acting Assistant Attorney General Caldwell. “In doing so, BNPP deliberately disregarded U.S. law of which it was well aware, and placed its financial network at the services of rogue nations, all to improve its bottom line. Remarkably, BNPP continued to engage in this criminal conduct even after being told by its own lawyers that what it was doing was illegal.”

“BNPP banked on never being held to account for its criminal support of countries and entities engaged in acts of terrorism and other atrocities,” said U.S. Attorney Bharara. “But that is exactly what we do today. BNPP, the world’s fourth largest bank, has agreed to plead guilty and pay penalties of almost $9 billion for performing the hat trick of sanctions violations, unlawfully opening the doors of the U.S. financial markets to three sanctioned countries, Sudan, Iran, and Cuba. For years, BNPP provided access to billions of dollars to these sanctioned countries, as well as to individuals and groups specifically identified and designated by the U.S. government as being subject to sanctions. The bank did so deliberately and secretly, in ways designed to evade detection by the U.S. authorities. For its years-long and wide-ranging criminal conduct, BNPP will soon plead guilty in a federal courthouse in Manhattan.”

According to documents released publicly today, over the course of eight years, BNPP knowingly and willfully moved more than $8.8 billion through the U.S. financial system on behalf of sanctioned entities, including more than $4.3 billion in transactions involving entities that were specifically designated by the U.S. Government as being cut off from the U.S. financial system. BNPP engaged in this criminal conduct through various sophisticated schemes designed to conceal from U.S. regulators the true nature of the illicit transactions. BNPP routed illegal payments through third party financial institutions to conceal not only the involvement of the sanctioned entities but also BNPP’s role in facilitating the transactions. BNPP instructed other financial institutions not to mention the names of sanctioned entities in payments sent through the United States and removed references to sanctioned entities from payment messages to enable the funds to pass through the U.S. financial system undetected.

“The significant financial penalties imposed on BNP Paribas sends a powerful deterrent message to any company that places its profits ahead of its adherence to the law,” said FBI Director James Comey. “We will continue to work closely with our federal and state partners to ensure compliance with U.S. banking laws to promote integrity across financial institutions and to safeguard our national security.”

“Today’s outcome is a testament to U.S. efforts to stem the exploitation of the American financial system and ensure that if you chose to do business in our country you must abide by our laws,” said IRS-CI Chief Weber. “BNP Paribas will forfeit the historic figure of almost $8.9 Billion representing the proceeds of criminal activity. BNPP had many opportunities to take corrective action and abide by the law, and yet, despite warnings from American regulators and other banks, consciously chose to ignore those warnings and commit literally thousands of flagrant violations. IRS-CI, and our domestic and international law enforcement partners, will continue to pursue these cases and follow the money trail—wherever it may lead.”

“The most important values in the international community—respect for human rights, peaceful coexistence, and a world free of terror—significantly depend upon the effectiveness of international sanctions,” said District Attorney Vance. “Today’s guilty plea marks the seventh major case involving sanctions violations by a large international bank that my Office has pursued and resolved since 2009. These cases are critically important for international public safety and the security of our banking system, which is put at risk when it is used to further criminal activity. The seven investigations have revealed a series of widespread schemes to falsify the business records of financial institutions in Manhattan and have resulted in the forfeiture of approximately $12 billion in total. But, more importantly, they have resulted in a fundamental change in the way all banks conduct their business, have heightened vigilance worldwide with respect to dealing with sanctioned entities, and have increased the integrity of our Manhattan-based financial institutions.”

BNPP will waive indictment and be charged in a one-count felony criminal information, filed in federal court in the Southern District of New York, charging BNPP with knowingly and willfully conspiring to commit violations of IEEPA and TWEA, from 2004 through 2012. BNPP has agreed to plead guilty to the information, has entered into a written plea agreement, and has accepted responsibility for its criminal conduct. BNPP is scheduled to formally enter its guilty plea before United States District Judge Lorna Schofield on July 1, 2014 at 4:30 p.m.

The plea agreement, subject to approval by the court, provides that BNPP will pay total financial penalties of $8.9736 billion, including forfeiture of $8.8336 billion and a fine of $140 million.

In addition to the joint forfeiture judgment, the New York County District Attorney’s Office is also announcing today that BNPP has pleaded guilty in New York State Supreme Court to falsifying business records and conspiring to falsify business records. In addition, the Board of Governors of the Federal Reserve System is announcing that BNPP has agreed to a cease and desist order, to take certain remedial steps to ensure its compliance with U.S. law in its ongoing operations, and to pay a civil monetary penalty of $508 million. The New York State Department of Financial Services (DFS) is announcing BNPP has agreed to, among other things, terminate or separate from the bank 13 employees, including the Group Chief Operating Officer and other senior executives; suspend U.S. dollar clearing operations through its New York Branch and other affiliates for one year for business lines on which the misconduct centered; extend for two years the term of a monitorship put in place in 2013, and pay a monetary penalty to DFS of $2.2434 billion. In satisfying its criminal forfeiture penalty, BNPP will receive credit for payments it is making in connection with its resolution of these related state and regulatory matters. The Treasury Department’s Office of Foreign Assets Control has also levied a fine of $963 million, which will be satisfied by payments made to the Department of Justice.

According to documents released publicly today, including a detailed statement of facts admitted to by BNPP, BNPP has acknowledged that, from at least 2004 through 2012, it knowingly and willfully moved over $8.8 billion through the U.S. financial system on behalf of Sudanese, Iranian and Cuban sanctioned entities, in violation of U.S. economic sanctions. The majority of illegal payments were made on behalf of sanctioned entities in Sudan, which was subject to U.S. embargo based on the Sudanese government’s role in facilitating terrorism and committing human rights abuses. BNPP processed approximately $6.4 billion through the United States on behalf of Sudanese sanctioned entities from July 2006 through June 2007, including approximately $4 billion on behalf of a financial institution owned by the government of Sudan, even as internal e-mails showed BNPP employees expressing concern about the bank’s assisting the Sudanese government in light of its role in supporting international terrorism and committing human rights abuses during the same time period. Indeed, in March 2007, a senior compliance officer at BNPP wrote to other high-level BNPP compliance and legal employees reminding them that certain Sudanese banks with which BNPP dealt “play a pivotal part in the support of the Sudanese government which . . . has hosted Osama Bin Laden and refuses the United Nations intervention in Darfur.”

One way in which BNPP processed illegal transactions on behalf of Sudanese sanctioned entities was through a sophisticated system of “satellite banks” set up to disguise both BNPP’s and the sanctioned entities’ roles in the payments to and from financial institutions in the United States. As early as August 2005, a senior compliance officer at BNPP warned several legal, business and compliance personnel at BNPP’s subsidiary in Geneva that the satellite bank system was being used to evade U.S. sanctions: “As I understand it, we have a number of Arab Banks (nine identified) on our books that only carry out clearing transactions for Sudanese banks in dollars. . . . This practice effectively means that we are circumventing the U.S. embargo on transactions in USD by Sudan.”

Similarly, BNPP provided Cuban sanctioned entities with access to the U.S. financial system by hiding the Cuban sanctioned entities’ involvement in payment messages. From October 2004 through early 2010, BNPP knowingly and willfully processed approximately $1.747 billion on behalf of Cuban sanctioned entities. In the statement of facts, BNPP admitted that it continued to do U.S. dollar business with Cuba long after it was clear that such business was illegal in order to preserve BNPP’s business relationships with Cuban entities. BNPP further admitted that its conduct with regard to the Cuban embargo was both “cavalier” and “criminal,” as evidenced by the bank’s 2006 decision, after certain Cuban payments were blocked when they reached the United States, to strip the wire messages for those payments of references to Cuban entities and resubmit them as a lump sum in order to conceal from U.S. regulators the bank’s longstanding, and illicit, Cuban business.

Further according to court documents, BNPP engaged in more than $650 million of transactions involving entities tied to Iran, and this conduct continued into 2012—nearly two years after the bank had commenced an internal investigation into its sanctions compliance and had pledged to cooperate with the Government. The illicit Iranian transactions were done on behalf of BNPP clients, including a petroleum company based in Dubai that was effectively a front for an Iranian petroleum company, and an Iranian oil company.

This case was investigated by the IRS-Criminal Investigation’s Washington Field Division and FBI’s New York Field Office. This case is being prosecuted by the Money Laundering and Bank Integrity Unit of the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS), and the Money Laundering and Asset Forfeiture Unit of the U.S. Attorney’s Office for the Southern District of New York. Trial Attorneys Craig Timm and Jennifer E. Ambuehl of AFMLS and Assistant United States Attorneys Andrew D. Goldstein, Martin S. Bell, Christine I. Magdo and Micah W.J. Smith of the Southern District of New York are in charge of the prosecution.

The New York County District Attorney’s Office also conducted its own investigation alongside with the Department of Justice on this investigation. The Department of Justice expressed its gratitude to the Board of Governors of the Federal Reserve, the Federal Reserve Bank of New York, the New York State Department of Financial Services and the Treasury Department’s Office of Foreign Assets Control for their assistance with this matter.