On June 30, 2014, BNP Paribas SA (“BNPP”), the largest bank in France, pled guilty to conspiring to violate U.S. sanctions laws and agreed to pay a total of nearly $8.9 billion in criminal forfeiture and penalties to the U.S. Government. The BNPP case represents the most significant action to date in the U.S. Government’s enforcement of U.S. sanctions laws against non-U.S. companies, not only because the fine is the largest ever imposed by the U.S. Government in connection with violations of sanctions laws, but also because it marks the first instance in which a non-U.S. bank has been required to accept a guilty plea in connection with settling charges of sanctions violations brought by the U.S. Government. This matter underscores the need for non-U.S. companies to be fully aware of their potential liability under such laws.
BNPP pled guilty to willfully conspiring to violate the International Emergency Economic Powers Act, the Trading with the Enemy Act and economic sanctions programs promulgated thereunder with respect to Burma (Myanmar), Cuba, Iran and Sudan by:
- Deliberately using a non-transparent method of payment messages (known as “cover payments”), and otherwise modifying payment instructions, to conceal the involvement of sanctioned persons in U.S. dollar-denominated transactions to be processed through BNPP’s U.S. affiliates and other U.S. financial institutions so that such transactions would not be blocked or rejected as required by U.S. law;
- Working with other financial institutions to structure the payments at issue in highly complicated ways to conceal the involvement of sanctioned parties;
- Instructing other financial institutions to not identify sanctioned parties in U.S. dollar-denominated payment messages sent to BNPP’s New York branch or other U.S. financial institutions; and
- Following instructions from sanctioned persons to not identify such persons in U.S. dollar-denominated payment messages sent to U.S. financial institutions.
Charges against BNPP were brought jointly by the U.S. Department of Justice, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC), the Federal Reserve, the Internal Revenue Service, the New York District Attorney and the New York Department of Financial Services (NYDFS).
The dollar-clearing services provided by BNPP to sanctioned parties occurred between 2002 and 2012 and were valued at more than $190 billion. These activities resulted in the landmark penalty not only because of the large number and value of the underlying transactions, but also because BNPP continued to conduct activities in violation of U.S. law even after it: (i) became aware that such activities were illegal; (ii) had been informed that it was under investigation by the U.S. Government; and (iii) became aware, and assessed the applicability, of several enforcement actions brought by the U.S. Government against other large, non-U.S. financial institutions for violations of sanctions laws resulting from the same types of activities being conducted by BNPP.
BNPP’s New York banking license was not suspended or revoked, but the bank will be prohibited from providing U.S. dollar clearing services on behalf: (i) of its oil & gas and trade finance operations (where most of the violating behavior occurred) for a period of one year; and (ii) any unaffiliated third-party banks in New York and London for a period of two years. The company also agreed to terminate and/or discipline forty-five executives and other employees and to extend by two years the term of a monitor appointed by the NYDFS to review the bank’s compliance with sanctions and anti-money laundering laws.
The BNPP case clearly demonstrates the substantial risk under U.S. sanctions laws for non-U.S. financial institutions that conduct transactions involving sanctioned persons, particularly when such transactions are denominated in U.S. dollars. While U.S. Government enforcement activity against non-U.S. entities involved in dollar-denominated transfers to date has focused mainly on non-U.S. financial institutions that direct such transfers, enforcement officials could turn their attention to non-U.S. companies (other than financial institutions) that conduct dollar-denominated transactions with sanctioned persons. Any company that does business with sanctioned countries or persons should take precautions to ensure that its activities are in compliance with U.S. law, or else risk becoming yet another cautionary chapter in the book of U.S. Government sanctions enforcement.