US prosecutors want US$3.5 billion to settle BNP Paribas sanctions case

US prosecutors reportedly want to settle with the French lender over its dealings with sanctioned countries like Iran and Sudan

PUBLISHED : Thursday, 15 May, 2014, 1:43am
UPDATED : Thursday, 15 May, 2014, 4:44am

United States authorities are seeking more than US$3.5 billion from BNP Paribas to settle federal and state investigations into the lender's dealings with sanctioned countries including Sudan and Iran, according to people familiar with the matter.

The agreement, which could be the largest penalty for sanctions violations, was still being negotiated and the amount could fluctuate, said four people who asked not to be named because the discussions are private.

US prosecutors are also seeking a guilty plea from BNP, which said last month it might need more than the US$1.1 billion it had set aside to settle the case.

The agreement could come in the next month, the people said.

BNP is one of several banks negotiating multibillion-dollar settlements with US prosecutors, who are trying to counter criticism that they have shied away from punishing financial institutions because of their size and influence on the economy.

Prosecutors' push for a guilty plea - part of the more aggressive approach - has raised regulatory concerns the punishment could disrupt financial markets.

"It's a very high fine and also a way for the bank to turn the page," said Karim Bertoni, an asset manager at de Pury Pictet Turrettini & Company in Geneva.

"Beyond that, we're going into uncharted territory," he said, referring to the impact of a guilty plea on the financial system. De Pury Pictet did not disclose whether it holds BNP stock.

BNP Paribas shares fell as much as 2.3 per cent on the news. The shares have dropped 6.6 per cent this year. Julia Boyce, a BNP spokeswoman, declined to comment on the discussions.

In 2012, HSBC Holdings paid US$1.9 billion over claims it broke anti-money-laundering and sanctions laws.

Manhattan US prosecutor Preet Bharara, Manhattan district attorney Cyrus Vance Jnr and David O'Neil, the head of the Justice Department's criminal division in Washington, are working together on the BNP Paribas investigation.

Benjamin Lawsky, superintendent of New York's Department of Financial Services, is also investigating the bank.

The BNP probe, which was conducted in part by the Federal Bureau of Investigation in New York, focuses on the bank's dealings with Sudan, Iran and Cuba - countries that are under US economic sanctions.

Prosecutors met BNP officials last week and were still discussing settlement terms, including the type of charges and whether the parent company or a subsidiary would plead guilty, one of the sources said.

Prosecutors have been reluctant to criminally charge a company after the Justice Department's 2002 indictment of Arthur Andersen caused the accounting firm to collapse and put about 85,000 people out of work.

A guilty plea would be a departure from previous sanctions cases which typically ended with deferred prosecution agreements that spared offending companies from prosecution.

Samuel Buell, a former federal prosecutor who is now a professor at Duke University school of law, said: "The Justice Department is trying to play to two audiences at the same time: the public, which wants something that looks like real punishment, and the financial industry, which needs to be sent some sort of message that will deter these behaviours."