by Philip Mattera
France's BNP Paribas, one of the largest banks in Europe, has the dubious distinction of having paid a record $8.9 billion penalty after pleading guilty plea to criminal charges that it violated U.S. economic sanctions.
BNP Paribas had its origins in two French banks -- Comptoir National d'Escompte de Paris and Banque National pour le Commerce et l'Industrie -- which were nationalized after the Second World War and merged in 1966 to form Banque Nationale de Paris.
After being privatized in 1993, BNP began expanding its operations outside France, including the United States. After Societe Generale and Paribas announced merger plans in 1999, BNP tried to block the deal by launching a hostile bid for both banks. In the end BNP ended up acquiring Paribas and renamed itself BNP Paribas. It went on to acquire control of Italy's Banca Nazionale del Lavoro and later Belgium's Fortis Bank.
The Sanctions Case
In 2014 BNP Paribas agreed to plead guilty to criminal charges that it violated two U.S. laws relating to economic sanctions -- the International Emergency Economic Powers Act and the Trading with the Enemy Act --by processing billions of dollars of transactions through the U.S. financial system on behalf of Sudanese, Iranian and Cuban entities subject to sanctions in the period from 2004 to 2012.
BNP was compelled to pay a criminal penalty of $8.9 billion and was put on probation for five years. The case was the first time a financial institution had been convicted and sentenced for violations of U.S. economic sanctions, and the total financial penalty—which included forfeiture and a criminal fine—was the largest ever imposed in a criminal case. The $8.9 billion payment also satisfied civil cases brought against BNP by the Federal Reserve, the Office of Foreign Assets Control and the New York State Department of Financial Services.
Other Litigation and Regulatory Cases
In 2005 BNP Paribas agreed to pay $37.5 million as its portion of a $428 million settlement by four banks of a case brought by investors who purchased bonds underwritten by the banks on behalf of WorldCom, the telecommunications company that went bankrupt after revelations of a major accounting scandal.
In 2008 the U.S. Commodity Futures Trading Commission fined BNP Paribas Commodity Futures $25,000 for failing to provide timely and accurate account information for a reportable large trader account, as required by CFTC regulations. In 2015 the CFTC fined BNP Paribas Securities $140,000 in connection with allegations that it violated rules concentration limits applicable to the investment of segregated commodity customer funds.
In 2015 the U.S. Justice Department announced that it recovered $80 million from BNP Paribas in connection with allegations that the bank had submitted false claims under the Agriculture Department's Supplier Credit Guarantee Program (which provided payment guarantees to U.S.-based exporters for their sales of grain and other agricultural commodities to foreign customers).
Also in 2015, the Justice Department announced that BNP Paribas (Suisse) SA would pay a penalty of $59.8 million and enter into a non-prosecution agreement to resolve criminal charges that it aided customers in evading U.S. taxes.
In another 2015 case, Hong Kong's Securities and Futures Commission fined BNP Paribas Securities (Asia) HK$15 million for lapses in operating its dark pool trading services. The following year, the agency fined BNP Paribas Wealth Management HK$4 million for overcharging clients.
In 2011 BNP's U.S. subsidiary Bank of the West agreed to pay $48,000 to settle a case brought by the Equal Employment Opportunity Commission alleging that the company refused to hire a woman as a branch manager because of her gender.
A 2016 report by In the Public Interest listed BNP Paribas as one of the six main banks providing financing to major private prison companies in the United States.
Use of Tax Havens
A 2016 report by Oxfam France and other groups estimated that BNP Paribas and other large French banks derive one-third of their international profits from tax haven countries.
Other Information Sources
Violation Tracker summary page
Watchdog Groups and Campaigns
Key Books and Reports
Investing Responsibly: A Financial Puzzle (SOMO, September 2010).
Sur La Piste des Banques Francaises dans les Paradis Fiscaux (CCFD-Terre Solidaire et al, March 2016).
The Banks that Finance Private Prison Companies (In the Public Interest, November 2016).
Undue Diligence: How Banks Do Business with Corrupt Regimes (Global Witness, March 2009).
Last updated February 23, 2017